CIBC FX Flows: FXWW

From the FXWW Chatroom: Asia started off slow, broadly a weaker Usd pairs. UsdJpy slipped little, to 106.97. Most of the sellers were foreign banks and participation from Japanese banks minimal. UsdJpy trading above the base of Ichimoku Cloud 106.89. Orders are light, heard bids out of Tokyo mid 106’s. Option strikes maturing today, 107.20 for $1.5bn, 105.93 for $800mio and 105.65 for $1.75bn.

Market is likely to stay calm ahead of Abe/Trump summit starting today at Mar-a-Lago resort. On top of the agenda is Japan/US trade and the North Korea meeting with Trump. Firm US stance on Japan trade would put pressure on UsdJpy whilst Trump’s U-turn on TPP is welcoming. Two mid-sized lifers announced that they will increase unhedged foreign assets investments as hedging cost increases. They like to increase US, Aussie and Canada by Jpy220bn. Their UsdJpy forecast for fiscal is 98-116.

Again, RBA reiterated no strong case to adjust monetary policy despite acknowledging next interest rate move is up, not down and that GDP growth is likely to exceed potential. AudUsd, trades below the 50, 100 and 200-Day SMAs. Bids are reported at 0.7750.

Meanwhile, AudNzd cross firmed up, putting some pressure on the NzdUsd. Earlier, IMF published Article IV on New Zealand and said the IMF has doubts that ban on foreign buyer will help the housing market. The fund also said economic growth to remain strong but the risks to growth over medium term remain a concern. NzdUsd started off at 0.7370 has backed off to 0.7351.

Saw some fast money guys selling UsdCad, printed low 1.2560. Talk of bids starting to gather on the downside. Scattered from 1.2540’s to 1.2500. I think the crucial level is 1.2550. Just a reminder, there are some $3.3bn of 1.2600 options strikes maturing this week, not a small amount. Today we have the Feb International Sec Transactions and manufacturing sales, tomorrow is BoC rates decision, we are sticking to our call – unchanged.

Cable has printed new high since Brexit, 1.5 is now within reach. Asia took out the overnight hi as well as 1.4350, to print 1.4355. Investors will closely monitor today’s UK labour report. Average Weekly Earnings is expected to hit 3% from 2.8%, this will put pressure on BoE to hike rates.

Asians

Singapore’s March NODX disappointed, down 1.8% monthly, fell 7.1% annually; electronic exports down 7.1%. Feb revisions also worsened. UsdSgd unchanged, as usual.

Everyone is watching Hkd and how much is HKMA spending to keep the Hkd under control. HKMA said this morning, it sees no need for any interest rate adjustment mechanism. This left many questioning why and the real reason is housing market. One report in FT said as HKMA buying Hong Kong dollars to mop up excess liquidity, Hibor should nudge up. While the move might be positive for banks, other sectors, such as property, could suffer. Double whammy if they intervene and hike rates.

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