Article Highlights

  • China’s CB leading index pops up by 1.2% vs. 0.9% previous
  • Australia’s MI leading index slips by 0.1% vs. 0.0% growth in January
  • BOJ’s monetary policy meeting minutes
  • Japan’s trade surplus improves to 0.68T JPY vs. 0.20T surplus in January
  • Japan’s all industries activity rises by 0.1% as expected vs. 0.2% decline previous
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Risk aversion was the name of the game during the Asian session, as forex traders took cues from the previous session and worried over the timeline of Trump’s tax and fiscal policy plans.

Major Events:

Japan’s trade balance report – Earlier today the world’s third largest economy printed a trade surplus of 813.4B JPY for the month of February, which is higher than January’s reading but is slightly below the 822B JPY expected figure.

A closer look tells us that sales to China helped boost exports by 11.3% from a year earlier, which marks the biggest gain since January 2015. Meanwhile, imports improved by 1.2% (mainly due to higher oil prices) against estimates of a 0.6% growth.

BOJ’s meeting minutes – While the Bank of Japan (BOJ) kept its monetary policy steady for another month a few days ago, its March meeting minutes revealed that at least one member had contemplated on raising the central bank’s yield targets or reducing the BOJ’s debt purchases.

For forex newbies out there, you should know that higher U.S. Treasury yields also tend to push up Japanese government bond yields. This is bad news for the BOJ, who wants to keep 10-year bond yields “around zero percent” to encourage risk-taking in its domestic market.

But even more members believe that economic risks remain tilted to the downside and that they should concentrate on hitting their 2.0% inflation target. At the end of the day, they voted to keep the pedal to the metal.

However, they also acknowledged that the economy has improved enough for them to say that companies will soon modestly raise prices and wages to reflect their improved confidence on the economy.

They also raised their outlook over the next three years. Growth in 2016 is now expected to come in at 1.4% (up from 1.0%) while FY 2018 and FY2019 growth rates are both revised 0.2% higher.

Overall risk aversion – It was a bloody day for the Asian bourses, as market players caught up to Wall Street’s weak closing. If you recall, sentiment took another hit as more traders got concerned over the Donald’s capacity to implement his “phenomenal” tax and fiscal policy plans promised a couple of weeks back.

It also didn’t help that a Japanese news outlet, which cited a Japanese government source and was later supported by a U.S. official, reported that North Korea might have attempted to launch “several” missiles earlier today. And though “attempted” is the operative word, the possibility of more geopolitical tensions made it easier to take profits from higher-yielding bets.

Nikkei is down by 2.02%, the Shanghai index is down by 0.73%, Hang Seng is down by 1.22%, and Australia’s A SX 200 is down by 1.58%. Oil prices also took hits with Brent crude oil falling by 0.16% to $50.88 while U.S. crude oil prices slipped by 0.19% to $48.15.

One silver lining is a business sentiment survey which clocked in at its highest in almost two years in Q1 2017. Data from Thomson Reuters/INSEAD showed the Asian Business Sentiment Index clocking in an index reading of 70, which is higher than Q4 2016’s 63 reading, thanks to optimism over the U.S. economy and lack of a bigger economic crisis in China and Europe.

Market Movers:

JPY – Risk aversion pushed the low-yielding yen higher across the board. It also didn’t hurt that Japan had just printed a strong trade data and that the BOJ’s meeting minutes floated the possibility of the BOJ raising its bond yield targets.

EUR/JPY slipped by 24 pips (-0.20%) to 120.52, AUD/JPY dropped by 29 pips (-0.34%) to 85.56, and GBP/JPY fell by 13 pips (-0.09%) to 139.30.

Comdolls – Commodity-related currencies were one-two punched by overall risk aversion and lower commodity prices.

AUD/USD is down by 23 pips (-0.30%) to .7662, USD/CAD is up by 18 pips (+0.14%) to 1.3377, and NZD/USD is down by 7 pips (-0.10%) to .7029 after dropping to a session low of .7014.

Watch Out For:

  • 9:00 am GMT: Euro Zone current account (29.3B EUR expected, 31.0B EUR previous)

See also:

U.S. Session Recap
London Session Recap

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