Week in FX ASIA Japan remains a large foreign bond buyer

The MoF latest data shows that Japan remains a major foreign bond buyer. Volumes remain very high with sales of Y2.478t against purchases of Y3.5205t as many made their way back from the Oban-summer holidays. The dollar again seems to have been the favored destination, with US yields and USD/JPY considerably higher of late. Interest in the typical commodity currencies, AUD, NZD and CAD, seems to have cooled off, as these currencies seem to be fading on global and especially Asia-China growth concerns. Other recent stars like TRY and IDR seemed have also lost some of their luster. On the flip side, foreign investors were huge sellers of Japanese bills, perhaps due to fresh reserves seeking higher yields.

Below are some other highlights of the week:

ASIA

• KRW: Moody’s upgraded South Korea’s sovereign debt rating to Aa3 from A1 (strong fiscal fundamentals, high degree of economic resilience and competitiveness, reduced external vulnerability of the banking sector, and continuation of the status-quo in North-South geopolitics).
• KRW: South Korea’s consumer confidence index was at 99 in August, from 100 in July, dropping to the lowest level in seven-months.
• CNY: China’s Industrial companies’ profits in the first seven months of the year declined -2.7% in July, compared with a +28.3% gain in the same period in 2011.
• CNY: Market is still figuring out if we are in for a hard or soft landing. Premier Wen Jiabao is urging extra measures to support exports and help meet economic targets as evidence mounts that the nation’s slowdown is deepening.
• ZAR: South Africa GDP grew +3.2%, q/q in Q2, in line with market expectations, up from +2.7% in Q1.
• JPY: Japan’s government downgraded its domestic economic outlook for the first time in 10-months as some analysts forecast that gross domestic product will shrink this quarter, in light of weaker IP and exports.
• NZD: Fonterra revised the 2013 pay-out for farm gate milk prices to +NZD$5.65-$5.75, down from +NZD$5.95-$6.05 previously, amid declines in global prices.
• INR and CNY: India and China pressed each other for greater market access for their products at a meeting of trade ministers this week, seeking to expand commercial ties as they battle the global downturn. They are targeting to increase trade flows by +$25b to +$100b in two years.
• AUD: Aussie HIA new home sales fell -5.6%, m/m in July, following a +2.8% increase in June.
• THB: Thailand manufacturing production fell -5.8%, y/y in July, weaker than the consensus at -4.3%.
• PHP: Philippine imports rose +13.3%, y/y in June, following a +10.1% increase in May, while the trade balance posted a deficit of -$787m in June, compared with deficit of -$454m in May.
• AUD: Aussie construction work done fell -0.2%, q/q in Q2, weaker than the consensus for a +0.5% rise. However, the Q1 rate was revised higher to +7.8%, q/q from the +55% initial estimate.
• INR: RBI Governor said that policy makers need to reduce the nation’s inflation rate by about -2pp.
• KRW: South Koreas current a/c surplus hit a record of +$6.10b in July, while June’s current account balance was revised marginally higher to +$5.88b from +$5.83b previously. This should support the currency, but expect the BoK to cap any significant appreciation.
• THB: Thailand’s exports fell -4.46%, y/y in July, compared to the -2.5% fall in June while imports gained +13.73%, y/y after the +4.41% increase in June.
• AUD: Aussie capital expenditure rose +3.4%, q/q in Q2, above consensus for +3%, while the Q1 rate was revised higher to +7.7% from the +6.1% initial estimate.
• NZD: The NBNZ activity outlook, which has shown a good leading relationship to GDP, rose slightly to 26.4 in August after four consecutive monthly declines since April this year.
• BRL: The Brazilian Central Bank cut the Selic rate by -50bp to +7.50%, in line with expectations. The Brazilian finance minister Mantega says his country is practicing a devaluation policy to make its currency more competitive (part of his global “currency war” rhetoric).
• PHP: The Philippine’s GDP rose +0.2%, q/q in Q2, down from +1.1% in Q1. Year-over-year, GDP has risen +5.9% in Q2, down from +6.3% in Q1. It’s suggested that strong investment and private consumption growth played a key role.
• JPY: Japan’s retail sales fell -0.8%, y/y in July, following a +0.2% rise in June. Large retail store sales fell -4.4%, compared with a -2.6% fall in June.
• KRW: The BoK’s manufacturing business survey indicator made the first advance in four months to 75 in September from 70 in August.
• JPY: Japan’s manufacturing activity contracted in August to the lowest level in 16-months. The manufacturing PMI fell to a 47.7 in August from 47.9 in July. IP dropped -1.2%, m/m in July, compared with +0.4%, m/m increase in June.
• CNY & TWD: China and Taiwan signed a currency clearing agreement, allowing for the settlement of transactions in yuan in Taiwan. The agreement would pave the way for Taiwan to become the second offshore RMB trading center after Hong Kong.
• SGD: S&P affirmed Singapore AAA ratings with stable outlook. The statement highlighted Singapore’s robust public finances and net external creditor position.
• AUD: Aussie private sector credit rose +0.2%, m/m in July, from a +0.3% increase in June and rose +4.2%, y/y in July, compared with +4.4% increase in June.
• KRW: South Korea’s IP fell -1.6%, m/m in July, compared with a revised +0.6% fall in June.

AMERICAS Week in FX

EUROPE Week in FX