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Asia Roundup: Kiwi hits 3-week lows after RBNZ stands pat, dollar below 110 against yen on lingering N. Korea tensions, Asian shares tumble - Thursday, August 8th, 2017

Market Roundup

  • N. Korea details Guam missile plan, calls Trump's warning a 'load of nonsense'
     
  • RBNZ less dovish on rates than expected, favours lower NZ$
     
  • UK house price growth weakest in over 4 years - RICS, +1 vs 7
     
  • Japan June core machinery orders -1.9% m/m, -5.2% y/y, +3.7%, -1.0% eyed
     
  • Q2 ’17 core -4.7% q/q, biggest drop since Q2 ’16, Q3 eyed at +7.0% however
     
  • Japan July domestic corp goods prices +0.3% m/m, +2.6% y/y, +0.2%, +2.4% eyed
     
  • MoF flow data wk-ended Aug 5 – Japanese buy more for-bonds, net Y1.6242 trln
     
  • Also net Y160.8 bln foreign stocks, Y149.9 bln bills in latest week
     
  • Foreigners buy net Y598.3bln JGBs Y81.9bln Japan bills, sell Y37.7bln stocks

Economic Data Ahead

  • (0245 ET/0645 GMT) France Jun Industrial Output, -0.50% eyed, last 1.90%
     
  • (0430 ET/0830 GMT) Great Britain Jun Manufacturing Output, 0.00% m/m, 0.60% y/y eyed, last -0.20%, 0.40%
     
  • (0430 ET/0830 GMT) Great Britain Jun Goods Trade Balance, -11.00 bln eyed, last -11.86 bln
     
  • (0430 ET/0830 GMT) Great Britain Jun Industrial Output, 0.10% m/m, -0.10% y/y eyed; last -0.10%, -0.20%
     

Key Events Ahead

  • (1000 ET/1400 GMT) Fed's William Dudley to speak at in New York

FX Beat

DXY: The dollar was trading higher against most of its major peers as recent series of upbeat data strengthened the prospects of an additional Fed rate hike this year. The greenback against a basket of currencies traded 0.2 percent up at 93.71, having touched a high of 93.89 the day before, it’s highest since July 28. FxWirePro's Hourly Dollar Strength Index stood at 58.02 (Bullish) by 0500 GMT.

EUR/USD: The euro edged down after retreating from a near 2-week low in the previous session as the greenback steadied on data showing U.S. productivity rising 0.9 percent in the second quarter of 2017 and unit labor costs rising 0.6 percent. The European currency traded 0.2 percent down at 1.1737, having touched a low of 1.1688 the day before, its lowest since Jul. 28. FxWirePro's Hourly Euro Strength Index stood at -95.93 (Slightly Bearish) by 0400 GMT. Investors’ attention will remain on series of data from the Eurozone economies, ahead of the U.S. unemployment benefits claims, producer price index and Fed official William Dudley's speech. Immediate resistance is located at 1.1800, a break above targets 1.1850. On the downside, support is seen at 1.1720 (61.8% retracement 1.1370 and 1.1909), a break below could drag it near 1.1638 (50.0% retracement 1.1370 and 1.1909).

USD/JPY: The dollar continued to weaken against the Japanese yen as heightened tensions between the United States and North Korea sent investors seeking safety into safe haven assets. On Wednesday, the major fell to an eight week low, however, it trimmed some losses after data showed that Japan's machinery orders declined in the month of June. The major was trading down at 110.01, having hit a low of 109.55 the day before, its lowest since Jun 15. FxWirePro's Hourly Yen Strength Index stood at 134.46 (Highly Bullish) by 0400 GMT. Investors’ will continue to track broad based market sentiment, ahead of the U.S. unemployment benefits claims, producer price index and Fed official William Dudley's speech for further momentum. Immediate resistance is located at 110.59 (61.8% retracement of 112.19 and 109.55), a break above targets 110.90 (50.0% retracement of 112.19 and 109.55). On the downside, support is seen at 109.63 (June 12 Low), a break below could take it near 109.22 (June 6 Low).

GBP/USD: Sterling declined, reversing most of its previous session losses, as investors cautiously awaited the releases of the UK industrial and manufacturing production data, alongside the goods trade balance and construction output data release for the next direction on the British currency. The major traded 0.1 percent down at 1.2988, having hit a low of 1.2952 on Tuesday, its lowest since July 20. FxWirePro's Hourly Sterling Strength Index stood at -2.12 (Neutral) by 0400 GMT. Investors’ focus will remain on series of UK data, ahead of the U.S. fundamental drivers. Immediate resistance is located at 1.3057 (21-DMA), a break above could take it near 1.3103 (10-DMA). On the downside, support is seen at 1.2932 (July 20 Low), a break below targets 1.2893 (July 5 Low). Against the euro, the pound was trading flat at 90.37 pence, having hit a 10-month low of 90.87 on Tuesday.

AUD/USD: The Australian dollar slumped, extending losses for the eighth consecutive session as domestic Consumer Inflation Expectation declined to 4.2 percent in August from previous 4.4 percent. Moreover, escalating tensions over North Korea continued to support safe-haven assets. The Aussie trades 0.2 percent down at 0.7874, having hit a low of 0.7855 the day before, it’s weakest since July 18. FxWirePro's Hourly Aussie Strength Index stood at -66.75 (Bearish) by 0500 GMT. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7850, a break below targets 0.7800. On the upside, resistance is located at 0.7917 (5-DMA), a break above could take it near 0.7948 (10-DMA).

NZD/USD: The New Zealand dollar slumped to a three-week trough as the country's central left interest rates at a record low 1.75 percent and kept projections for rates largely unchanged. The Reserve Bank of New Zealand said that there was no reason to cut interest rates at present as inflation was expected to return to target over time. The Kiwi trades 0.9 percent down at 0.7269, having touched an early low of 0.7268, its lowest level since July 18. FxWirePro's Hourly Kiwi Strength Index was at -47.10 (Neutral) by 0500 GMT. Investors’ will continue to track broad based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7328 (78.6% retracement of 0.7558 and 0.7265), a break above could take it near 0.7375 (5-DMA). On the downside, support is seen at 0.7250, a break below could drag it till 0.7200.

Equities Recap

Asian shares slumped as rising tensions between the United States and North Korea sent investors stampeding into safe-haven assets.

MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 0.7 percent.

Tokyo's Nikkei declined 0.05 percent to 19,732.04 points, Australia's S&P/ASX 200 index eased 0.2 percent to 5,755.50 points and South Korea's KOSPI slumped 0.3 percent to 2,361.59 points.

Shanghai composite index fell 0.8 percent to 3,249.76 points, while CSI300 index was trading 0.7 percent down at 3,706.31 points.

Hong Kong’s Hang Seng was trading 0.9 percent lower at 27,502.01 points. Taiwan shares shed 1.3 percent to 10,329.74 points.

Commodities Recap

Crude oil prices edged down after rising to a near 2-week high the prior day on official figures showing U.S. crude inventories fell more than expected. International benchmark Brent crude was trading 0.2 percent down at $52.68 per barrel by 0436 GMT, having hit a high of $52.90 last week, its strongest since May 25. U.S. West Texas Intermediate was trading 0.2 percent down at $49.51 a barrel, after rising as high as $50.40 last week, its strongest since May 25.

Gold prices steadied after rising to a near two-month high hit in the previous session as demand for the safe haven strengthened on rising tensions in the Korean peninsula. Spot gold traded at $1,276.72 per ounce at 0440 GMT, after gaining 1.3 percent to touch a high of $1,278.56 an ounce on Wednesday, it highest level since June 14. U.S. gold futures for December delivery rose 0.2 percent to $1,281.20 per ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.246 percent higher by 0.004 bps, while 5-year yield was 0.009 bps up at 1.805 percent.

The Japanese government bonds gained after investors covered previous short positions on growing geo-political tension between the US and North Korea over a possible nuclear war ahead of a long weekend in Japan. The yield on the benchmark 10-year Treasury note traded tad lower at 0.06 percent, the yield on long-term 30-year note rose nearly 1 basis point to 0.86 percent and the yield on short-term 2-year traded flat at -0.10 percent.

The Australian bonds slid, tracking weakness in the U.S. Treasuries after the overnight 10-year note auction was welcomed with weak demand. The yield on the benchmark 10-year Treasury note rose nearly 1 basis point to 2.65 percent, the yield on 15-year note also climbed nearly 1 basis point to 2.96 percent while the yield on short-term 2-year traded flat at 1.81 percent.

The Canadian government bond prices were higher across a flatter yield curve in sympathy with U.S. Treasuries as investors bought safe-haven assets. The 10-year rose 24 Canadian cents to yield 1.907 percent, while the gap between the 2-year yield and the 10-year yield narrowed by 1 basis point to 66.8 basis points, as longer-dated bonds outperformed.

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