Asian Session Forex Recap – Oct. 4, 2016

  • China’s markets still out on holiday
  • AU building approvals slips by 1.8% after rising by 12.0% in July
  • AU ANZ job ads down by 0.3% vs. 1.7% uptick August
  • RBA keeps its rates steady at 1.50% in October

The yen and the Aussie were the stars of today’s Asian session show, as the former weakened across the board while the latter priced in the RBA’s statement.

Major Events:

Overall yen weakness – Though there was no single catalyst that consistently weighed on the currency, the low-yielding yen was the biggest loser in today’s Asian session trading.

Analysts pointed to generally strong U.S. reports printed yesterday as one of the boosters for USD/JPY and other yen crosses. Of course, it also didn’t hurt that stop losses just above USD/JPY’s 102.00 levels were hit, inspiring further upticks for the pair.

Nobuyuki Nakahara, advisor to Shinzo Abe, also hinted that they would be open to buying foreign bonds to counter yen strength if it’s not considered as currency intervention. For forex newbies out there, you should know that buying foreign bonds would not only mean selling the yen to buy bonds denominated in other currencies, but it would also increase the demand (and therefore yield) of other countries’ bonds and make their currencies more attractive.

RBA monetary policy decision – There were no fireworks in Governor Philip Lowe’s first policy decision, as the Reserve Bank of Australia (RBA) kept its rates steady at a record low of 1.50% in October.

The central bank mostly copied its previous statement, saying that

Taking account of the available information, and having eased monetary policy at its May and August meetings, the Board judged that holding the stance of policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.

Details reveal that the RBA is pointing to increases in commodity prices in the past few months is expecting continued expansion in near-term employment. Heck, texts on inflation, the major consideration for the past two rate cuts, were copied from the previous month’s statement!

The RBA also isn’t too worried about the housing market overheating. It mostly copied its previous remarks about growth in lending slowing down and added references to slower turnover and slower rental growth in the housing market.

The main takeaway from the release is that the RBA is generally feeling chill about the economy. Analysts point to the lack of conditional remarks in the last bit of the statement, which signals that the RBA isn’t seriously considering a rate cut once the latest inflation reports come in.

Major Market Movers:

JPY – The yen got clobbered across the board on dollar strength and overall risk appetite.

USD/JPY is up by 52 pips (+0.51%) to 102.12, EUR/JPY is up by 45 pips (+0.40%) to 114.36, and GBP/JPY is up by 54 pips (+0.41%) to 131.06.

AUD – The Aussie made a U-turn during the Asian session, as expectations of a dovish RBA statement weighed on the currency (except against the yen). Luckily, the Aussie found support when the not-so-dovish RBA statement was released.

AUD/USD is down by 12 pips (-0.16%) to .7663 and AUD/NZD is down by 37 pips (-0.35%), but AUD/JPY is up by 27 pips (+0.35%) to 78.25.

Watch Out For:

  • 5:00 am GMT: Japan’s consumer confidence (41.8 expected, 42.0 previous)
  • 5:30 am GMT: AU commodity prices (y/y)
  • 7:00 am GMT: Spanish unemployment change (23.5K expected, 14.4K previous)
  • 8:30 am GMT: U.K. construction PMI (49.1 expected, 49.2 previous)
  • 9:00 am GMT: Euro Zone PPI (0.0% expected, 0.1% previous)

See also:

U.S. Session Recap
London Session Recap

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