FOREX: Little FX Shifts In Early Friday Trade, EU Currencies Up For The Week
Aggregate FX moves are not large in the FX space so far in Friday Asia Pac dealings. The BBDXY index was last little changed near 1292. It is still down for the week by close to 0.65%, the second straight week of losses.
- USD/JPY is down a touch, last near 152.60, but is still well above recent lows (sub 151.00). Yen is also down 0.80% for the week, the weakest G10 performer, see the chart below.
- NZD/USD has ticked up, last near 0.5685. Earlier we had a rise in the PMI back above the 50.0 level, while food prices were also very strong in Jan. Westpac noting this shouldn't shift RBNZ thinking for a 50bps cut next week, but inflation trends going forward will need to be watched. Upside focus for NZD/USD is likely to rest with earlier Feb highs just above 0.5700. This would also represent a test above the 50-day EMA.
- AUD/USD has also ticked higher, last around 0.6320. We are just sub Jan 24 highs at 0.6331.
- EU related currencies have outperformed this week, with hopes of Ukraine peace deal, and less adverse tariff news aiding sentiment. SEK is the standout up 2%.
- In the cross asset space, regional equity trends are mixed. Hong Kong shares continue to outperform, but onshore markets in Chin are close to flat. USD/CNH is firmer above 7.2800, which may taking the shine off AUD and NZD at the margins. US equity futures are a touch higher, while US yields sit up a touch.
Fig 1: G10 FX Returns Versus The USD - Past 5 Days
Source: MNI - Market News/Bloomberg
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AUSSIE BONDS: Subdued Session Ahead Of US CPI
ACGBs (YM -2.0 & XM -2.0) are slightly cheaper after trading in a narrow range in today's Sydney session.
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session after yesterday’s directionless session. Focus turns to today’s CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December.
- Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential at -14bps.
- Swap rates are 2-3bps higher.
- The bills strip flat to -1 across contracts.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (101%) now, with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
- Today, the local calendar is empty.
- Expectations of strong pricing at auctions were confirmed, with the latest ACGB Dec-34 supply achieving a weighted average yield that printed 0.70bp through prevailing mids (per Yieldbroker). The cover ratio also improved, rising to 2.8875x from 2.8375x.
- AOFM Bond issuance will issue A$700mn of the 2.75% 21 November 2027 bond on Friday.
ASIA STOCKS: China & Hong Kong Equities Opening Slightly Lower
- China & Hong Kong equities are opening slightly lower in morning trade, although ranges are narrow. The Hang Seng is -0.30%, while CSI 300 is -0.40% with Tech & Healthcare sectors struggling the most.
- Chinese regulators plan to implement measures, including a swap facility and refinancing facility introduced by the PBOC, to stabilize the stock market. These tools are expected to inject approximately ¥400bi into the A-share market in 2025, according to strategists from CICC and CITIC Securities.
- Country Garden reported a record loss of ¥178.4b ($24.3b) amid China’s prolonged housing crisis, driven by impairments, declining margins, and weak sales. While its first-half 2024 loss narrowed to ¥12.8b, the developer faces mounting debt of ¥250b and ongoing challenges in its restructuring efforts, with a key wind-up petition hearing set for January 20. Shares remain suspended, having lost 97% of their value since 2018. Property Indices are underperforming the wider market this morning, with the Mainland Property Index -1.25%, while BBG China Property Developer Index is -0.90%.
CHINA PRESS: China M2 Increases In December
China’s M2 money supply reached CNY313.5 trillion in December, up 7.3% y/y, driven by the migration of government deposits and wealth management funds to resident and corporate deposits, according to Mingming, chief economist at CITIC Securities. Looking ahead, new credit and social financing are expected to increase y/y as authorities adopt a moderately easing monetary policy and guide financial institutions to increase credit supply, said Wang Qing, chief macro analyst at Orient Securities. (Source: Securities Daily)
