FX Flows

From the FXWW Chatroom – NzdUsd is well bid this morning, despite Q3 terms of trade falling 3.7%. Report published by Statistics NZ showed that export volumes led by meat with beef rising 12%, lamb up 8.5%. Dairy volumes rise 11% led by milk powder. Witnessed selling of AudNzd, supposedly for stops and Japanese were buyers of NzdJpy. They said macro names were offering NzdUsd 0.6625-30 but not strong enough as the pair traded up to 0.6638. 

The next pair to move…AudUsd. Initially capped by AudNzd selling, AudUsd went bid after the strong Oct building approvals. Move above 0.7250 took out stops and not just in AudUsd but other Aussie crosses as well. We believe momentum funds will want to buy this AudUsd on dips. I hear offers in AudUsd atop 0.7275-0.7300 and smart stops thereafter. 

Aussie focus tomorrow will be the Q3 GDP. Over the quarter, experts are expecting a 0.8% gain versus previous 0.2%. However before that at 11.12am local, RBA Governor Glenn Stevens will be speaking at the Australia-Israel Chamber of Commerce. 

Left hand side fix in UsdJpy and it didn’t end there. Story in Dow Jones Newswire that Japan public pension fund has started to hedge small of its investments against currency fluctuations. In past, the GPIF has said it does not hedge overseas investment. UsdJpy came off – filled bids surrounding 122.80. So far bounce has been insignificant. 

Euro played along with Aud, rose to 1.0597. Seemed common to all there are sellers surrounding this 1.0600 and stop buy orders beyond 1.0655. Interesting that short term names left stop sell orders in mid-1.05’s 

Canadian dollar tracked the AudUsd. Toronto closed 1.3361, the pair first came off 20 pips. We found no reason for that move and we suspect it was a macro fund behind it. Appreciation in Aussie pushed UsdCad into 1.3320’s. Small bids are scattered below 1.33-handle. Later today Canada releases the Sept GDP and BOC rate decision on Wed. 

From our Fixed Income desk, Norman Hui: Early morning sell-off in UST as soon as market opens in Asia – yield is 1.5-2bp higher.  Nikkei is up +0.94% and ASX up +1.5%, coupled with SDR inclusion of RMB, and hearing some late rebalancing into equities post month-end likely caused bonds to underperform. 

Asians 
Except for CNH, the Usd is offered. We believe this is all positioning and also poor liquidity as we move into the final month of 2015. 

USDCNY fixed at 6.3973, in line with market expectations versus yesterday’s fix at 6.3962. There was a squeeze up in USDCNH – or panic and offshore went to 6.4457 from 6.4340. 

(CIBC) 
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