Yen and Aussie have their own Battle

Finance Minister Azumi says Japan is closely watching the EUR’s decline versus the Yen. Currently, the market is seeing more Yen intervention dangers if the declines accelerate much further. Today’s move is putting pressure on the BoJ/MoF to try and curb their currency strength. The market should not expect the recent US criticism of Japanese intervention policy to influence any of Japan’s decisions. A stone throw away and we have the AUD starting to look like “more” than just a commodity currency. Its strong performance against the EUR indicates that Aussie can be seen as a key alternative as more investors shy away from EUR looking for yield and growth alternatives.

Below are some other highlights of the week:

Asia

• CNY: Manufacturing PMI rose +1.3pts to 50.3 last month. Analysts believe this as a “relatively weak print given mildly supportive seasonal patterns in December”. Manufacturers tend to push production higher ahead of their Chinese New Year long holidays. Data does not seem to be easing the anxiety about a hard landing. On the flip side, non-manufacturing PMI rebounded to 56 in December from 49.7 in November; and suggests that the services sector is holding up relatively well.
• SGD: Advanced estimate for Singapore’s Q4 GDP showed a +4.9%, q/q. An annualized fall, largely in line with the consensus forecast. However, the government revised down Q3 growth to +1.5%, q/q.
• INR: The finance ministry announced an easing of restrictions on qualified foreign investor (QFI) direct investment in Indian equities. QFI’s will be allowed to invest directly in the equity market in two weeks time.
• THB: Thai inflation for December came in at +3.5%, y/y, well below market expectations for +4.0%. The market believes that the Thai Central Bank intervened this week.
• AUD: Aussie trade surplus fell to AUD1.4b in November, weaker than the AUD1.7b consensus. Both import and export momentum has slowed. The October trade balance was revised lower to AUD1.4bn from AUD1.6bn. Their largest trading partner, China saw imports from Australia on a three-month/three-month basis slow from the October peak of +28% to +9% in November (Analysts think it could be due to a lagged effect).
• PHP: The country’s inflation eased more than expected, supporting the case for a rate cut. The inflation rate slowed to an 11-month low in December of +4.2%, much below the +4.7%.Market expects the central bank to cut its policy rate by -25bps in Q1.

AMERICAS Week in FX

EUROPE Week in FX