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Asia Roundup: Aussie hits 3-month peak on strong retail sales, dollar steadies amid worries over China's stance on U.S. bonds, Asian shares slump- Thursday, January 11th, 2018

Market Roundup

  • Reports on China slowing U.S. debt buying could be based on wrong information
     
  • China Premier Li says 2017 GDP growth expected around 6.9 percent
     
  • S.Korea justice ministry prepares to ban cryptocurrency trading, exchanges raided
     
  • BoJ stands pat on JGB 1-5, 5-10 year purchase
     
  • Japan’s December foreign reserves up to $1.264 trl, end-November $1.261 trln
     
  • Japan to forecast delay in budget surplus to FY2027 - Nikkei
     
  • Nikkei mfg index for ASEAN gives rise to concerns beyond ’18
     
  • China says protectionist sentiment rising in the US as deals fall apart
     
  • Canada increasingly convinced Trump will pull out of NAFTA
     
  • Mexico will leave NAFTA talks if Trump triggers process to withdraw
     
  • Australian retail sales surge on iPhone, Black Friday bonanza

Economic Data Ahead

  • (0300 ET/0800 GMT) Spain Nov Ind Output Cal Adj YY, f'cast 3.1%, 4.1% last
     
  • (0400 ET/0900 GMT) Germany 2017 Full Year GDP, f'cast 2.4%, 1.9% last
     
  • (0500 ET/1000 GMT) EZ Nov Industrial Production YY, f'cast 3.0%, 3.7% last
     
  • (0500 ET/1000 GMT) EZ Nov Industrial Production MM, f'cast 0.8%, 0.2% last

Key Events Ahead

  • (1130 ET/1630 GMT) Eurogroup President Jeroen Dijsselbloem speaks about the future of the eurozone at LSE in London
     
  • (1530 ET/2030 GMT) Federal Reserve Bank of New York President William Dudley gives a keynote speech before the event "U.S. Economic Outlook: What's In Store For 2018," organized by the Securities Industry and Financial Markets Association in New York
     

FX Beat

DXY: The dollar index steadied after falling to as low as 91.92 on Wednesday. The greenback against a basket of currencies traded flat at 92.38, having touched a high of 92.64 on Wednesday, its highest since Dec. 29

EUR/USD: The euro consolidated as a positive tone seen around the U.S. Treasury yields continue to support the greenback. The European currency traded flat at 1.1947, having touched a low of 1.1916 on Tuesday, its lowest since Dec. 28. Investors’ attention will remain on the Eurozone industrial production and ECB monetary policy meeting accounts, ahead of U.S. producer price index, unemployment benefit claims and Fed William Dudley's speech. Immediate resistance is located at 1.1998 (10-DMA), a break above targets 1.2052. On the downside, support is seen at 1.1923 (Previous Session Low), a break below could drag it lower 1.1900.

USD/JPY: The dollar rebounded after falling to 2-week lows in the previous session on the back of a report that China was ready to slow or halt its purchases of U.S. Treasuries. The major was trading 0.3 percent up at 111.78, having hit a low of 111.27 the day before, its lowest since Dec. 28. Investors’ will continue to track broad-based market sentiment, ahead of the U.S. producer price index, unemployment benefit claims and Fed William Dudley's speech for further momentum.  Immediate resistance is located at 112.08 (38.2% retracement of 111.27 and 113.38), a break above targets 112.57 (5-DMA). On the downside, support is seen at 111.06 (Nov. 23 Low), a break below could take it near 110.84 (Nov. 27 Low).

GBP/USD: Sterling slumped, extending losses for the third consecutive session, as investors booked profits after a rally and refrained from pushing it any higher until they see major new catalysts. The major traded 0.1 percent down at 1.3488, having hit a low of 1.3481 in the previous session; it’s lowest since Dec. 29. Immediate resistance is located at 1.3527 (10-DMA), a break above could take it near 1.3555. On the downside, support is seen at 1.3448 (21-DMA), a break below targets 1.3400. Against the euro, the pound was trading 0.1 percent down at 88.54 pence, having hit a high of 88.08 pence on Tuesday, it’s highest since Dec. 19.

AUD/USD: The Australian dollar rallied to a three-month peak after a surprisingly strong reading on retail sales boosted the outlook for consumer spending and economic growth. The economy's retail sales climbed 1.2 percent in November, three times the market forecast and the biggest gain since early 2013. The Aussie trades 0.5 percent up at 0.7876, having hit a high of 0.7881 earlier; it’s highest since Oct. 20. Investors will continue to track overall market sentiment, ahead of U.S. economic releases. Immediate support is seen at 0.7845 (5-DMA), a break below targets 0.7765 (Dec. 28 Low). On the upside, resistance is located at 0.7890, a break above could take it near 0.7940.

NZD/USD: The New Zealand dollar held firm near a 3-month peak hit in the previous session, supported by upbeat Chinese Caixin manufacturing PMI as well as NZ GDT price index. The Kiwi trades flat at 0.7198, having touched a high of 0.7229 the day before, its highest level since Sept. 29. Investors’ will continue to track broad-based market sentiment, ahead of U.S. economic data. Immediate resistance is located at 0.7240, a break above could take it near 0.7310. On the downside, support is seen at 0.7171 (5-DMA), a break below could drag it lower 0.7133 (10-DMA).

Equities Recap

Asian shares eased as concerns about the U.S. administration's protectionist stance hit Wall Street, while the dollar rebounded against the yen after falling to 2-week lows in the previous session.

MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.1 percent in early trade.

Tokyo's Nikkei eased 0.4 percent to 23,688.78 points, Australia's S&P/ASX 200 index fell 0.5 percent to 6,063.90 points and South Korea's KOSPI lost 0.6 percent to 2,485.23 points.

Shanghai composite index declined 0.2 percent to 3,416.65 points, while CSI300 index was trading 0.3 percent up at 4,195.23 points.

Hong Kong’s Hang Seng was trading 0.2 percent lower at 31,010.50 points. Taiwan shares shed 0.5 percent to 10,776.88 points.

Commodities Recap

Crude oil prices consolidated near three-year highs, supported by a surprise drop in U.S. production and lower crude inventories. International benchmark Brent crude was trading flat at $69.11 per barrel by 0416 GMT, having hit a high of $69.34 the day before, its highest since May 2015. U.S. West Texas Intermediate was trading flat at $63.49 a barrel, after rising as high as $63.65 o Wednesday, its highest since 2014.

Gold prices rose for a second straight day, having hit their highest since September in the previous session, as the dollar weakened and a flagging rally in equities sent investors towards safe-haven assets. Spot gold was 0.1 percent up at $1,318.04 an ounce by 0420 GMT, after rising to as high as $1,327.24 an ounce on Wednesday, the most since Sept. 15. U.S. gold futures were little changed at $1,319.10 an ounce.

Treasuries Recap

The 10-year U.S Treasury yield stood at 2.531 percent lower by 0.018 bps, while 5-year yield was 0.013 bps down at 2.312 percent.

The Japanese government bonds gained as the Bank of Japan maintained the amount of its bond buying in its open market operation. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell over 1 basis point to 0.073 percent, the yield on the long-term 30-year note dipped 1/2 basis point to 0.847 percent and the yield on short-term 2-year also slid 1/2 basis point to -0.128 percent.

The Australian government bonds plunged following higher-than-expected retail sales data for November. Also, weakness in the U.S. Treasuries pushed the bond yields higher. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose 1-1/2 basis points to 2.717 percent, the yield on the long-term 30-year note jumped 2-1/2 basis points to 3.429 percent and the yield on short-term 2-year climbed 2-1/2 basis points to 2.062 percent.

The Canadian government bond prices were higher across the yield curve, with the two-year up 11.5 Canadian cents to yield 1.734 percent and the 10-year rising 36 Canadian cents to yield 2.160 percent. The 10-year yield had touched its highest since September 2014 at 2.231 percent earlier in the session. The gap between Canada's two-year yield and its U.S. counterpart widened by 7.3 basis points to a spread of -24.3 basis points.

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