Forex news for Asia trading Thursday 28 January 2016

BOJ meeting today and tomorrow - announcement Friday

  • Most forecast USD/JPY to 125, but outliers say 115 and 110, even if BOJ eases more
  • Bank of Japan monetary policy meeting today and Friday - preview
  • More from Abe adviser Honda: No knowledge of BOJ's intentions
  • Japan PM Abe: Government and BOJ will work together to defeat deflation
  • Japan PM Abe advisor Honda: He would do extra monetary easing
  • Japan retail sales data for December show a miss
  • Kuroda wants business to hike wages. But he just got a minuscule wage rise himself
  • Nikkei on the 115 - 125 range for USD/JPY - lines in the sand?

China:

  • Offshore yuan bought by Chinese banks early
  • China stockmarket opening indications - Shanghai Comp to open down 0.9%
  • People's Bank of China (PBOC) sets yuan reference rate at 6.5528
  • PBOC Reverse Repo activity - injects yuan through OMO into money market
  • Barclays says China's PBOC may buy 215 tons of gold in 2016
  • China People's Daily: China economy won't see 'hard landing'

New Zealand, Australia:

  • Westpac expects RBNZ to cut to 2.25% in March (from June previously)
  • New Zealand December trade balance: -53m (expected -131m)
  • Australia - Q4 Export price index -5.4% q/q (-3.9% expected) & Import -0.3% (-0.8%)

FOMC:

  • Has the Federal Reserve cranked up its worries to Iraq War level?
  • Reuters poll shows most primary dealers expect 3 fed rate hikes this year
  • Trade ideas thread for Thursday 28 January 2016

The RBNZ left its cash rate on hold. The announcement came at 3pm NY time, so Adam snaffled it for the US wrap. The scoundrel. Check it out there, and also the FOMC decision if you've missed it.

Post-FOMC moves into early Asia were characterised by caution, with a languishing AUD, NZD and USD/JPY. As more centres entered the market, though, sentiment improved a little. It was helped along by a bit of tumble for USD/CNH, traders citing large Chinese banks selling (i.e buying yuan), adding a bit to the cautious risk-positive tone. USD/JPY recovered towards 119.00 again (it didn't get that far), AUD towards 0.7050 (ditto). NZD had a smaller tick higher, weighed on by a dovish RBNZ and Fonterra cutting their payout forecast.

The yuan fix was uneventful, again, another tiny strengthening for the CNY. There was more interest in the PBOC open market operations; the bank injected 340bn yuan today. Added to the 440bn yuan auctioned on Tuesday this is the largest weekly injection since February of 2013. The point on this is it appears not only to be cash injections ahead of the lunar new year holidays, when demand for liquidity is very high, but also a form of policy easing to take the place of (i.e. instead of) a RRR cut. A RRR cut would be more longer lasting, these reverse repo injections are reversed in 7 or 28 days (d'uh). The People's Bank of China seems to be reasoning that a RRR cut sends too strong an easing signal, especially at this time where capital outflow and yuan devaluation concerns are heightened.

The injections come on top of other 'easings' through tools such as standing lending facility (SLF), medium-term lending facility (MLF) and pledged supplementary lending (PSL), which I posted on last week (here and then here).

USD/CHF ticked higher through the session, while cable gained small too, only to give most of it back.

Early Asia/late NY reports from Barclays saying China is buying a hefty amount of gold this year managed to more or less top-tick the gold upmove (see bullets, above). Oil managed some stability.Regional equities:

  • Nikkei -0.71%
  • Shanghai -0.48%
  • HK +0.18%
  • ASX +0.57%

Oh, I forgot to mention the EUR. Which says a lot. :-D. A subdued sideways move from early Australian time, barely getting out of a 20 range for EUR/USD.