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THE ASIA FX/RATES DAYBOOK: FX/RATES DAYBOOK ASIA: ECB Sinks Dollar While Treasuries Rally

(Bloomberg) — The dollar skidded to a fresh two-year low after the European Central Bank didn’t aggressively throw up roadblocks for the euro’s continued appreciation. Draghi’s inflation forecast downgrade combined with the growing threat of Hurricane Irma buoyed Treasuries, with 10-year yields touching a new YTD low. WHAT TO WATCH

  • Japan GDP and BOP; see more below
  • RBA’s Debelle, Lowe speak
  • NOTE: Fed’s Dudley to speak in New York at 7pm ET (7am HKT)

OVERNIGHT TRADING SESSIONS

  • Bloomberg dollar index fell as much as 0.8%; EUR/USD briefly rose to 1.2059 before paring gains; USD/JPY came close to testing 108.00 level then bounced to 108.50 range; UST 10Y yield touched YTD low of 2.032% as Hurricane Irma fears rattled markets, before rebounding to ~2.042%
  • In European trading, the euro rose for a fourth day ahead of ECB meeting to hit 1.1969; UST yields lower by 1.5bp-2bp across the curve, with 10Y down by 1.9bp at 2.086%

TOP OVERNIGHT NEWS

  • Draghi said the ECB is watching the euro’s gains as policy makers edge toward settling the future of their bond-buying program
  • Trump said there are “a lot of good reasons” to get rid of the U.S. debt ceiling as Democrats began exploring a deal with the president to end the recurring fiscal standoffs
  • The White House is said to be considering at least six candidates to be the next head of the Fed, including economists, executives with banking experience and other business people
  • Hurricane Irma continued on a collision course with Miami after battering Puerto Rico and devastating a chain of Caribbean islands, as the Category 5 storm threatens to become the most expensive in U.S. history

KEY VIEWS

  • The euro’s gains are seen as enduring despite Draghi’s warnings that the currency’s strength is creating uncertainty for the euro-area economy, analysts say
  • Trump’s deal with Democrats to suspend the debt limit through Dec. 8 may push U.S. default risk to the first quarter of next year and as late as spring 2018, analysts say

DATA RELEASED OVERNIGHT

  • U.S. jobless claims rose last week by the most in five years as tens of thousands of Texans displaced by Hurricane Harvey filed applications to collect benefits

ECONOMIC DATA (All times HK):

  • TBA: (China) Aug. Trade Balance CNY, est. 335.7b, prior 321.2b
    • Aug. Imports YoY CNY, est. 11.73%, prior 14.7%
    • Aug. Exports YoY CNY, est. 8.65%, prior 11.2%
    • Aug. Imports YoY, est. 10.0%, prior 11.0%
    • Aug. Exports YoY, est. 6.0%, prior 7.2%
    • Aug. Trade Balance, est. $48.5b, prior $46.7b
  • TBA: (Indonesia) Aug. Net Foreign Assets IDR, prior 1,665.6t
    • Aug. Foreign Reserves, prior $127.8b
  • 6:45am: (New Zealand) 2Q Mfg Activity Volume QoQ, prior -0.3%
    • 2Q Mfg Activity SA QoQ, prior 2.8%
  • 7:50am: (Japan) July BoP Current Account Balance, est. ¥2.03t, prior ¥934.6b
    • July BoP Current Account Adjusted, est. ¥1.65t, prior ¥1.52t
    • July Trade Balance BoP Basis, est. ¥518.0b, prior ¥518.5b
    • 2Q F GDP SA QoQ, est. 0.7%, prior 1.0%
    • 2Q F GDP Annualized SA QoQ, est. 2.9%, prior 4.0%
    • 2Q F GDP Nominal SA QoQ, est. 0.9%, prior 1.1%
    • 2Q F GDP Deflator YoY, est. -0.4%, prior -0.4%
    • 2Q F GDP Private Consumption QoQ, est. 0.9%, prior 0.9%
    • 2Q F GDP Business Spending QoQ, est. 0.5%, prior 2.4%
    • Aug. Bank Lending Incl Trusts YoY, prior 3.3%
    • Aug. Bank Lending Ex-Trusts YoY, est. 3.4%, prior 3.4%
  • 9:30am: (Australia) July Owner-Occupier Loan Value MoM, prior 0.3%
    • July Home Loans MoM, est. 1.0%, prior 0.5%
    • July Investment Lending, prior 1.6%
  • 12:30pm: (Japan) Aug. Bankruptcies YoY, prior 0.28%
  • 1pm: (Japan) Aug. Eco Watchers Survey Outlook SA, est. 50.1, prior 50.3
    • Aug. Eco Watchers Survey Current SA, est. 49.5, prior 49.7
  • 3:30pm: (Thailand) Sept. Foreign Reserves, prior $195.0b
    • Sept. Forward Contracts, prior $31.2b
  • 4pm: (Taiwan) Aug. Exports YoY, est. 12.39%, prior 12.5%
    • Aug. Imports YoY, est. 5.7%, prior 6.5%
    • Aug. Trade Balance, est. $5.52b, prior $5.37b

CENTRAL BANKS (All times HK):

  • 9:10am: BOJ Outright Bond Purchase 1-3 Years
    • BOJ Outright Bond Purchase 3-5 Years
    • BOJ Outright Bond Purchase 10-25 Years
    • BOJ Outright Bond Purchase 25 Years
  • 11am: RBA’s Debelle Participates in Panel in Sydney
  • 4:30pm: RBA Governor Lowe Gives Speech in Sydney

BOND SALES/PURCHASES (All times HK):

  • For corporate bonds, see New Issue Monitor
  • 9am: Australia Plans To Sell A$500.0m 5.75% 2021 Bonds
  • 10:35am: China to Sell CNY10.0b 91-Day Bills
    • China to Sell CNY10.0b 182-Day Bills
  • 11am: Bk of Thailand to Sell THB20b 14-Day Bills
  • 5:30pm: India to Sell INR30.0b FRB 2024 Bonds
    • India to Sell INR80.0b 6.79% 2027 Bonds
    • India to Sell INR20.0b 7.73% 2034 Bonds
    • India to Sell INR20.0b 6.62% 2051 Bonds

MARKETS as of ~4:55am IN HONG KONG

  • USD/JPY -0.7% to 108.50 (range 108.05-109.27)
  • EUR/USD +0.9% to 1.2022 (range 1.1914-1.2059)
  • AUD/USD +0.6% to 0.8048 (range 0.7975-0.8049)
  • NZD/USD +0.4% to 0.7232 (range 0.7172-0.7242)
  • USD/CAD -0.9% to 1.2118 (range 1.2111-1.2241)
  • GBP/USD +0.4% to 1.3100 (range 1.3033-1.3116)
  • USD/CHF -0.6% to 0.9507 (range 0.9494-0.9594)
  • USD/CNH -0.8% to 6.4865 (range 6.4847-6.531)
  • 1-mo. USD/TWD NDF -0.7% to 29.775
  • Bloomberg Dollar Spot Index -0.7% to 1138.20
  • JPM Emerging Mkt FX Index +0.5% to 71.61
  • JPM FX Volatility Index +1.1% to 8.33
  • U.S. stocks lower
    • S&P 500 little changed at 2465.10
    • DJIA -0.1% to 21785
  • Commodities:
    • WTI Crude -0.1% to $49.13/bbl
    • Gold +1.1% to $1,349/oz (range $1,333-$1,350)
    • Copper little changed at $6,899/mt

TECHNICAL OUTLOOK by Bloomberg strategist Vincent Cignarella

  • USD/JPY — Tested lower end of trading range between wave spans 108.13/110.56
  • Resistance: 109.27 Sept. 7 high; 109.40 Sept. 6 high
  • Support: 108.13 wave span; 107.77 Nov. 15 2017 low
  • EUR/USD — Trending toward test of YTD high 1.2070
  • Resistance: 1.2070 Aug. 29 high; 1.2108/09 Jan. 2/1 2015 highs
  • Support: 1.1984 Aug. 24/30 highs; 1.1950 Sept. 6 high
  • EUR/JPY — Upward momentum stalling around 50-DMA
  • Resistance: 131.35 Sept. 1 high; 131.58 Aug. 31 high
  • Support: 129.76 Sept. 4 low; 129.38/37 Sept. 5/6 lows
  • AUD/USD — Extending gains above 0.7950 2nd upper band support/resistance
  • Resistance: 0.8043 Aug. 1 high; 0.8066 July 27 high
  • Support: 0.7964 Sept. 6 low; 0.7942 Sept. 5 low
  • NZD/USD — Consolidating above 100-DMA
  • Resistance: 0.7259/63 Aug. 25/28 highs; 0.7278 Aug. 30 high
  • Support: 0.7191 100-DMA; 0.7158 Sept. 5 low
  • USD/KRW 1M Fwd — Consolidating, back below 50/100-DMAs
  • Resistance: 1130.35 100-DMA; 1136.90 Sept. 7 high
  • Support: 1119.65 Sept. 4 low; 1115.85 Aug. 1 low
  • USD/THB — Extending losses below 50-DMA
  • Resistance: 33.175 Sept. 6 high; 33.229 Aug. 31 high
  • Support: 33.035 Sept. 7 low; 32.969 May 1 2015 low
  • USD/SGD — Lower, extending downtrend
  • Resistance: 1.3539 Sept. 6 high; 1.3575 Sept. 5 high
  • Support: 1.3401 Sept. 7 low; 1.3387/89 Aug. 18/19 lows
  • USD/TWD — Lower within downtrend
  • Resistance: 30.104 Sept. 6 high; 30.177 Sept. 4 high
  • Support: 29.972 Sept. 7 low; 29.938 May 22 low
  • USD/MYR — Gapping lower
  • Resistance: 4.2695 Sept. 5 high; 4.2730 Aug. 30 high
  • Support: 4.2102 Sept. 7 low; 4.1995 Nov. 8 low
  • USD/PHP — Lower, testing 50-DMA
  • Resistance: 51.194 Sept. 6 high; 51.222 Aug. 29 high
  • Support: 50.827 50-DMA; 50.576 Aug. 10 low
  • USD/INR — Consolidating below multiple DMAs
  • Resistance: 64.2600 Sept. 6 high; 64.3262 Aug. 16 high
  • Support: 63.9269 Sept. 4 low; 63.8563 Aug. 28 low
  • USD/IDR — Attempting to establish downtrend
  • Resistance: 13335 Sept. 7 high; 13353 Aug. 25 high
  • Support: 13305 Sept. 7 low; 13220 Aug. 9 low

To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net To contact the editors responsible for this story: Boris Korby at bkorby1@bloomberg.net Greg Chang

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