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THE ASIA FX/RATES DAYBOOK: FX/RATES DAYBOOK ASIA: Treasuries Slump as Trump Touts Tax Plan

(Bloomberg) — Treasuries slid as traders zeroed in on President Trump’s tax plan, which includes breaks for companies and a one-time repatriation holiday for cash stashed overseas. The dollar climbed as much as 0.7 percent on the prospect the proposed tax amnesty will fuel a surge in greenback demand. Canada’s loonie plunged after BOC Governor Stephen Poloz said that the central bank will proceed “cautiously” with further rate hikes. The Reserve Bank of New Zealand kept its official cash rate unchanged and said policy will remain accommodative for a considerable period, prompting NZD/USD to reverse gains. WHAT TO WATCH

  • Inflation in South Korea is forecast to decelerate in September, with economists expecting the core rate expecting a tick to 1.7 percent year-on-year while the annual headline rate falls to 2.2 from 2.6 percent.
  • We’ll also get the weekly update on Japanese international securities transactions as well as the share of Swift global payments made in yuan and Australian job vacancies as of August.
  • Also during Asia trading — Boston Fed President Eric Rosengren will deliver a speech in New York at 8:00 a.m. Tokyo time.

OVERNIGHT TRADING SESSIONS

  • USTs maintained overnight losses, with yields ending higher by 4-8.5bp. Curve steepens sharply, sparked by large futures block trades
  • Dollar rallies for third day, gaining vs all G-10 peers. EUR/USD earlier approached 1.1700, falling to its lowest in about five weeks. Ongoing sales were seen from model-driven accounts adding to shorts as the currency shifts direction, and longer-term EUR bulls were throwing in the towel
  • USD/CAD jumped 1% to 1.2473 as investors repriced a cautious Poloz, trimming expectations for a third BOC rate hike this year. USD/JPY rose 0.5%, aided by UST selloff

TOP OVERNIGHT NEWS

  • Trump and Republicans announced a tax plan framework that would slash corporate rate to 20% and include a one-time tax holiday on earnings held offshore. With as much as $2.6 trillion in profits held offshore, even a fraction of that coming back could be a boon for the greenback. A repatriation rate of 10 percent is being considered, lawmakers said
  • NZD/USD relinquishes gain, drops to near 0.7200 as Acting Governor Grant Spencer says “a lower New Zealand dollar would help to increase tradables inflation and deliver more balanced growth”
  • Long after a deal was reached, debt limit disruptions live on in the repo market

KEY VIEWS

  • Mild USD selling expected in month-end portfolio flows with neutral USD signal against the euro expected: Credit Agricole
  • Bit is “more than just a fad,” Morgan Stanley Chief Executive Officer James Gorman said Wednesday, taking a a more measured view than crosstown rival Jamie Dimon, who earlier this month called the cryptocurrency “a fraud”

DATA RELEASED OVERNIGHT

  • Capital goods orders rose 0.9% vs est. 0.3% while durable goods climbed 1.7% vs est. 1% gain

ECONOMIC DATA (All times HK):

  • TBA: (China) 2Q F BoP Current Account Balance, prior $52.9b
  • 7am: (South Korea) Sept. CPI YoY, est. 2.2%, prior 2.6%
    • Sept. CPI Core YoY, est. 1.7%, prior 1.8%
    • Sept. CPI MoM, est. 0.2%, prior 0.6%
  • 7:50am: Sept. Japan Buying Foreign Stocks, prior ¥141.9b
    • Sept. Foreign Buying Japan Bonds, prior ¥55.0b deficit
    • Sept. Japan Buying Foreign Bonds, prior ¥381.8b
    • Sept. Foreign Buying Japan Stocks, prior ¥918.6b deficit
  • 9am: (China) Aug. Swift Global Payments CNY, prior 2.0%
  • 9:30am: (Australia) Aug. Job vacancies, prior 1.5%

CENTRAL BANKS (All times HK):

  • 4am: RBNZ Official Cash Rate, est. 1.75%, prior 1.75%
  • 5pm: RBA’s Guy Debelle Speaks at BOE Conference in London

BOND SALES/PURCHASES (All times HK):

  • For corporate bonds, see New Issue Monitor
  • 11:45am: Japan to Sell 2-Year Bonds
  • 12pm: Malaysia to Sell 15-Year Islamic Bonds
  • 5:30pm: Sri Lanka to Sell 10% 2022 Bonds
    • Sri Lanka to Sell 11.75% 2027 Bonds

MARKETS as of 4:45am in HONG KONG

  • USD/JPY +0.5% to 112.80 (range 112.22-113.26)
  • EUR/USD -0.4% to 1.1748 (range 1.1717-1.1795)
  • AUD/USD -0.5% to 0.7850 (range 0.7836-0.7889)
  • NZD/USD -0.1% to 0.7201 (range 0.7177-0.7239)
  • USD/CAD +1% to 1.2476 (range 1.2336-1.2483)
  • GBP/USD -0.5% to 1.3389 (range 1.3364-1.3461)
  • USD/CHF +0.3% to 0.9720 (range 0.9687-0.9770)
  • 1-mo. USD/TWD NDF +0.4% to 30.315
  • Bloomberg Dollar Spot Index +0.6% to 1163.24
  • JPM Emerging Mkt FX Index -0.7% to 69.35
  • JPM FX Volatility Index +0.1% to 8.52
  • U.S. stocks higher
    • S&P 500 +0.4% to 2507.04
    • DJIA +0.3% to 22341
  • Commodities:
    • WTI Crude +0.3% to $52.04/bbl
    • Gold -0.9% to $1,282/oz (range $1,282- $1,296)
    • Copper +0.4% to $6,437/mt

TECHNICAL OUTLOOK by Bloomberg strategist Vincent Cignarella

  • USD/JPY — Consolidating within corrective wave 2
  • Resistance: 113.32 July 20 intermediate wave; 113.53/58 July 13/14 highs
  • Support: 112.07 daily pivot; 111.65 Elliott wave span
  • EUR/USD — Within downtrend, momentum could extend to July lows
  • Resistance: 1.1804 pivot point; 1.1866 Sept. 21 low
  • Support: 1.1709 Aug. 18 low; 1.1682 Aug. 16 low
  • EUR/JPY — Consolidating within downtrend
  • Resistance: 133.09 Sept. 15 high; 133.26 Sept. 20 low
  • Support: 131.76 Sept. 14 high; 131.26 Sept. 13 low
  • AUD/USD — Extending losses toward 0.7800 trend support
  • Resistance: 0.7935 55-DMA; 0.7974 Sept. 25 high
  • Support: 0.7800 trend line; 0.7755 100-DMA
  • NZD/USD — Extending losses below 100- DMA
  • Resistance: 0.7252 Sept. 25 low; 0.7278 Sept. 26 high;
  • Support: 0.7168 Sept. 26 low; 0.7147 200-DMA
  • USD/KRW 1M Fwd — Higher through 200-DMA
  • Resistance: 1146.26 July 13 high; 1151.32 July 12 high
  • Support: 1132.32 Sept. 26 low; 1127.04 Sept. 21 low
  • USD/THB — Higher, breaching 50-DMA
  • Resistance: 33.367 Aug. 24/25 highs; 33.380 Aug. 23 high
  • Support: 33.088 Sept. 26 low; 33.035 Sept. 7 low
  • USD/SGD – – Higher, breaching 50-DMA
  • Resistance: 1.3611 Aug. 31 high; A,3637 Aug. 23 high
  • Support: 1.3502 Sept. 26 low; 1.3447 Sept. 25 low
  • USD/TWD — Rising above 50/100-DMAs
  • Resistance: 30.372 Aug. 18 high; 30.422 Aug. 11 high
  • Support: 30.137 Sept. 25 low; 30.093 Sept. 19 low
  • USD/MYR — Attempting short term uptrend
  • Resistance: 4.2262 Sept. 7 high; 4.2695 Sept. 5 high
  • Support: 4.1825 Sept. 8 low; 4.1775 Nov. 9 low
  • USD/PHP — Higher above 50- DMA
  • Resistance: 51.162 Sept. 21 high; 51.289 Sept. 15 high
  • Support: 50.493 100-DMA; 49.930 June 20 low
  • USD/INR — Higher breaching 200-DMA
  • Resistance: 65.7850 March 15 high; 66.2450 March 14 high
  • Support: 65.150 Sept. 26 low; 64.7275 Sept. 25 low
  • USD/IDR — Higher, breached multiple DMAs
  • Resistance: 13577 Dec. 5 high; 13609 Dec. 1 high
  • Support: 13333 200-DMA; 13227 Sept. 15 low

–With assistance from Luke Kawa, Edward Bolingbroke, Dennis Pettit and Robert Fullem. To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net

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