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THE ASIA FX/RATES DAYBOOK: FX/RATES DAYBOOK ASIA: UST Rout Stalls as Traders Eye Steepeners

(Bloomberg) — Treasuries stemmed overnight selling to end the day little changed, while the dollar’s three-day winning streak fell victim to month-end portfolio rebalancing and tempered optimism over President Trump’s tax reform proposals. Yen traders face a deluge of data Friday ahead of week-long holidays in South Korea and China that will likely dent liquidity across the region. WHAT TO WATCH

  • It’s jobs, CPI, retail sales and industrial production day in Japan, where the unemployment rate is projected to hold steady at 2.8 percent in August with the job-to-applicant ratio ticking up to 1.53
  • Economists anticipate that national headline and core inflation accelerated by two tenths of a percentage point in August, to annual rates of 0.6 and 0.7 percent, respectively. Retail sales are expected to drop 0.5 percent month-on-month in August, while the preliminary reading of industrial production perks up by 1.8 percent on a monthly basis
  • The summary of opinions from the Bank of Japan’s meeting this month is also slated to be released
  • On the docket elsewhere: the monthly change in New Zealand’s building permits in August, Vietnamese third- quarter GDP figures, and Australian private sector credit growth for August

OVERNIGHT TRADING SESSIONS

  • The dollar fell as much as 0.3%, losing ground against all of its G-10 peers. The kiwi paced gains, with NZD rising as high as 0.7239 vs USD. USD/JPY fell as much as 0.5% to 112.26, with yen aided by news that North Korea is “highly likely” to launch added military provocation, Yonhap News reported
  • USTs rebounded from Asia session losses, helped by a strong 7Y auction that featured the biggest direct award since December. 10Y yields ended back near 2.30% level, after topping at 2.36% in Asia, as breach of 200-DMA sparked a surge in futures selling

TOP OVERNIGHT NEWS

  • Most economists agree that Trump’s tax-reform blueprint will widen the U.S. budget deficit, tempering enthusiasm for quick action
  • China ordered North Korean companies active in the country to shut down as it seeks to implement United Nations’ sanctions against the hermetic regime.
  • One Treasuries trader is up $10 million after executing large block trades in 10-year and ultra- long futures, betting on curve steepening
  • Former Trump Chief Strategist Steve Bannon is back, and he’s targeting China
  • Banco de Mexico keeps its borrowing rate unchanged at 7%, saying that inflation appears to have peaked; the peso was little changed after the decision
  • Euro-area confidence surges to highest in decade

KEY VIEWS

  • Initiate 3-month EUR/USD cross-currency basis tighteners at -39.8bp, targeting -22bp with a stop of -50bp, given that recent widening is overdone: TD
  • Are markets crazy to succumb to another bout of tax-cut fever? Not yet, writes Bloomberg’s Cameron Crise

DATA RELEASED OVERNIGHT

  • GDP rose at a 3.1% annualized rate from prior quarter (est. 3%), the final reading on 2Q growth before likely significant storm- related distortions in storm-related data

ECONOMIC DATA (All times HK):

  • TBA: (Philippines) Aug. Bank Lending Net of RRPs YoY, prior 19.7%
    • Aug. Money Supply M3 SRF YoY, prior 13.5%
    • Aug. Bank Lending YoY, prior 18.7%
  • TBA: (Indonesia) Aug. Money Supply M2 YoY, prior 9.22%
    • Aug. Money Supply M1 YoY, prior 12.17%
  • TBA: (Hong Kong) Aug. Budget Balance HKD, prior -2.53b
    • Aug. Money Supply M1 HKD YoY, prior 18.4%
    • Aug. Money Supply M2 HKD YoY, prior 15.8%
    • Aug. Money Supply M3 HKD YoY, prior 15.8%
  • 7am: (South Korea) Aug. BoP Current Account Balance, prior $7.26b
    • Aug. BoP Goods Balance, prior $10.7b
    • Aug. Industrial Production YoY, est. 1.3%, prior 0.1%
    • Aug. Industrial Production SA MoM, est. 0.5%, prior 1.9%
    • Aug. Cyclical Leading Index Change, prior 0.2
  • 7:30am: (Japan) Aug. Jobless Rate, est. 2.8%, prior 2.8%
    • Aug. Job-To-Applicant Ratio, est. 1.5, prior 1.5
    • Aug. Overall Household Spending YoY, est. 0.9%, prior -0.2%
    • Aug. Natl CPI YoY, est. 0.6%, prior 0.4%
    • Aug. Natl CPI Ex Fresh Food YoY, est. 0.7%, prior 0.5%
    • Aug. Natl CPI Ex Fresh Food, Energy YoY, est. 0.2%, prior 0.1%
  • 7:50am: (Japan) Aug. Retail Trade YoY, est. 2.45%, prior 1.9%
    • Aug. Retail Sales MoM, est. -0.5%, prior 1.1%
    • Aug. Industrial Production MoM, est. 1.8%, prior -0.78%
    • Aug. Industrial Production YoY, est. 5.2%, prior 4.66%
    • Aug. Loans & Discounts Corp YoY, prior 3.8%
  • 9:30am: (Australia) Aug. Private Sector Credit MoM, est. 0.5%, prior 0.5%
    • Aug. Private Sector Credit YoY, est. 5.5%, prior 5.3%
  • 10am: (Singapore) Aug. Bank Loans and Advances YoY, prior 5.92%
    • Aug. Money Supply M1 YoY, prior 10.89%
    • Aug. Money Supply M2 YoY, prior 6.74%
  • 10am: (Vietnam) 3Q GDP YTD YoY, est. 6.1%, prior 5.73%
    • Sept. Exports YTD YoY, est. 19.5%, prior 17.9%
    • Sept. Imports YTD YoY, est. 22.0%, prior 22.3%
    • Sept. Trade Balance, est. $850.0m, prior $400.0m
    • Sept. CPI YoY, est. 3.4%, prior 3.35%
    • Sept. Retail Sales YTD YoY, prior 10.3%
    • Sept. Industrial Production YoY, prior 8.4%
  • 11:30am: (Thailand) Aug. Capacity Utilization ISIC, prior 60.2
    • Aug. Mfg Production Index ISIC NSA YoY, est. 2.4%, prior 3.73%
  • 12pm: (Japan) Aug. Vehicle Production YoY, prior 1.4%
  • 1pm: (Japan) Aug. Housing Starts YoY, est. 0.6%, prior -2.32%
    • Aug. Annualized Housing Starts, est. 970,000, prior 973,548
    • Aug. Construction Orders YoY, prior 14.9%
  • 3:30pm: (Thailand) Sept. Foreign Reserves, prior $200.1b
    • Sept. Forward Contracts, prior $31.1b
    • Aug. Exports YoY, prior 8.0%
    • Aug. Exports, prior $18.7b
    • Aug. Imports YoY, prior 18.3%
    • Aug. Imports, prior $17.4b
  • Aug. Trade Balance, prior $1.34b
    • Aug. BoP Current Account Balance, est. $3.0b, prior $2.77b
    • Aug. BoP Overall Balance, prior $2.31b
  • 5:30pm: (Sri Lanka) Sept. CPI YoY, est. 5.9%, prior 6.0%
    • Sept. CPI Moving Average YoY, est. 5.6%, prior 5.5%
  • 7pm: (India) Aug. Fiscal Deficit INR Crore, prior 63,211

CENTRAL BANKS (All times HK):

  • 7:50am: BOJ Summary of Opinions at Sept.20-21 Meeting
  • 9:10am: BOJ Outright Bond Purchase 5-10 Years
    • BOJ Outright Bond Purchase 10-25 Years
    • BOJ Outright Bond Purchase 25 Years
  • (Pakistan) SBP Rate Decision (Target), est. 5.75%, prior 5.75%

BOND SALES/PURCHASES (All times HK):

  • For corporate bonds, see New Issue Monitor
  • 9am: Australia Plans to Sell A$800.0m 2.75% 2028 Bonds
  • 10:05am: New Zealand Plans to Sell NZD150.0m 3.5% 2033 Bonds
  • 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 7.72% 2055 Bonds

MARKETS as of 5AM in HONG KONG

  • USD/JPY -0.5% to 112.33 (range 112.26-113.21)
  • EUR/USD +0.3% to 1.1786 (range 1.1721-1.1804)
  • AUD/USD +0.1% to 0.7857 (range 0.7800-0.7860)
  • NZD/USD +0.5% to 0.7237 (range 0.7167-0.7239)
  • USD/CAD -0.4% to 1.2432 (range 1.2417-1.2519)
  • GBP/USD +0.4% to 1.3441 (range 1.3343-1.3455)
  • USD/CHF -0.2% to 0.9704 (range 0.9698-0.9759)
  • 1-mo. USD/TWD NDF +0.1% to 30.351
  • Bloomberg Dollar Spot Index -0.2% to 1160.70
  • JPM Emerging Mkt FX Index +0.5% to 69.55
  • JPM FX Volatility Index -0.5% to 8.46
  • U.S. stocks higher
    • S&P 500 +0.1% to 2510.06
    • DJIA +0.2% to 22381
  • Commodities:
    • WTI Crude -1.1% to $51.59/bbl
    • Gold +0.4% to $1,287/oz (range $1,278-$1,289)
    • Copper +1.3% to $6,522/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, Dennis Pettit, Robert Fullem and Edward Bolingbroke. To contact the reporter on this story: Katherine Greifeld in New York at kgreifeld@bloomberg.net

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