Forex - Asia Open - Overnight Highlights.

Asia Open / Overnight Highlights

- Q2 GDP at 2.4% from 3.7% revised Q1 vs 2.6% consensus. Core PCE 1.1% vs 1.0% expected.

- Jul Chicago PMI 62.3 from 59.1, vs 56.0 consensus.

- Jul final Michigan CSI revised to 67.8 from 66.5 versus 67.0 consensus.

- Crude oil, $79.00 +0.64.

- China: PBoC said that it will "implement relatively loose monetary policy and strike a balance between economic growth, adjusting the structure of the economy and managing inflation expectations"; focus on policy flexibility, combining various policy tools (including OMO and RRR) to improve bank liquidity management; would ensure a "reasonable" pace of lending.

- China: Jul PMI-Mfg eased to 51.2 vs 52.1 in Jun; output was at 52.7 (-3.1 m/m); New Orders at 50.9 (-1.2 m/m); New Export Orders at 51.21 (-0.5 m/m).

- China: The banking regulator, CBRC ok-ed the plans for China Construction Bank (CCB) to issue $11 bln of rights issue in Hong Kong and Shanghai; CCB joins in the other major banks in replenishing capital.

- China: The Chinese SWF, CIC posted a 11.7% return on its global investments in 2009; net profit jumped 81% to $41.7 bln compared to the 2.1% loss in 2008

- S Korea: Jul exports up 29.6% y/y (Jun: rev 30.1% y/y); imports grew 28.9% y/y (Jun: rev 38.2% y/y); trade surplus edged down slightly to $5.67 bln vs rev $6.43 bln in Jun; Econ Min says trade surplus forecast for 2010 has been revised up to $30 bln fr4om $23 bln estimate previously.

- S Korea: BoK chief said that establishing global safety nets will ease the necessity for Asian central banks to accumulate FX reserves; will save on opportunity costs; need for closer policy cooperation on a global basis to prevent regulatory arbitrage.

- Hong Kong-France: HK billionaire Li Ka-shing will buy UK power grid from France's EDF for GBP5.8 bln ($9.1 bln) .

- Indonesia: BI said that it expects the 10-yr govt bond yields now at 8.05% are "expected to decline further" on "expectations of weakening dollar I addition to hope that Indonesia will become investment grade"; added that "controllable inflation" is another lure for foreign demand for govt debt paper.

- Philippines: BSP Asst. Governor Cyd Amador said that based on leading indicators there are clear signs of near-term strong growth; inflation outlook remains very favourable; within-target inflation argues for keeping policy unchanged.

- Philippines: Cut in subsidies for transport and rice will have some "one-off impact on inflation" this year and in 2011, but price pressures will stay within the target rang es.

- Philippines: The govt has projected to collect 14% more tax revenues in 2011 to help fund social services and infrastructure; plans to ask Congress for 14% increase in budget spending to PHP1.757 trln for 2011.

- India: RBI will discontinue its daily second LAF except for on reporting Fridays.

- India: Farm Min Sharad Paawr said that India's proposed Food Security Act could nearly double food subsidy bill to INR767.2bln-INR1.07 trln ($16.5-23 bln) from INR555.78 bln for FY10/11.

- India: Junior FinMin S.S. Palanimanickam said that any further increase in export duties for iron ore lumps (which has already been raised to 15% from 10% on 29th Apr) will be "premature".

FX: EUR/USD was under pressure as risk sentiment was sidelined and while expected USD offers due to well-hyped month hedge adjustments were brushed aside. A low of 1.2980 was reached in the European morning, but was rejected to ensure even the risk off reaction to US GDP would not result in a new intraday low. Prices worked their way higher into the end of the European session while stocks rebounded and USD was broadly soft, but the bounce stalled at 1.3070 and shy of intraday highs of 1.3095. EUR/USD ended the session at 1.3030/40.

USD/JPY may have been subject to some month-end influences, but the downside was also assisted by the equity decline. US GDP data knocked USD/JPY down to 85.95, but an upside surprise in Chic PMI and a better than expected Mich CSI release helped USD/JPY rebound to 86.70 while stocks also rebounded. Prices faded back to consolidate at 86.40 into the close despite back and forth in equities.

Bonds: Treasuries were flat in the Asian session but better buyers emerged in the London trade as the market awaited US GDP data, which came in lower, but showed an upward revision to Q1. The weaker growth outlook helped UST's extend gains and the upmove was little hindered by a stronger Chicago PMI. The subsequent upward revision to Michigan CSI however, coupled with the firmer Chicago PMI, helped equities climb out of the red, pressuring UST's off the highs. Once the equity rally ran out of steam, Treasuries continued their upward climb into the close. 2s -3bps 0.55%, 5s -6bps 1.60%, 10s -7bps 2.91%, and 30s -10bps 3.98%.

Equities: Equities started the day lower after a fall in GDP showed growth slowing to 2.4%. Stocks subsequently attempted to recover losses, rising after the stronger Chicago PMI and an upwardly revised Michigan CSI. The rally ran into some trouble in the early afternoon, before continuing into the close. The S&P finished the day up a marginal 0.01% as basic materials and consumer services led the index higher but utilities and technology lagged. The DJIA finished 0.01% lower . .

Asia Outlook: China PMI which was released over the weekend was a softer print at 51.2 (June: 52.1), reinforcing the view of moderating Chinese economic activity, but the consolation is that data has come out firmer than whisper numbers of around 50.5. S Korea meanwhile has posted robust exports data that underpins robust economic recovery in the N Asian nation. While US equities have been weighed by disappointing US growth numbers, it seems like Asian sentiments will probably not be beaten up too badly unless more negatives spew out of China. Meanwhile the usual busy start to the month should see firmer AXJ against the Greenback for starters though further gains are likely to be cautious given the mood.

NORTH ASIA

USD/KRW: Dips in the USD/KRW will probably be supported ahead of the 1174 handle next; but sustained dips below 1180 is the first real challenge. Exports data should be a boost for the KRW as should upwardly revised trade surplus target for the year. High vol of trades in the 1-mth NDFs which closed 1183-1185 from 1189-1190 open.

USD/CNY: Looks like the USD/CNY could find some space to ease back though such moves are likely to be measured on the back of the softer PMI which has shown demand slipping. 1Y NDs closed 6.6850-6.6900; no dealings cited.

USD/HKD: More inflows could see the USD/HKD having upside capped; for now we should see the pairing traded 7.7645-7.7680. Jun retail sales data due out at 0830GMT.

USD/TWD: A slightly softer start is seen with range of 31.90-32.05 likely for now. No dealings in the 1-mth NDFs which closed 31.91-31.94 from 31.95-31.98 open.

SOUTH ASIA

USD/SGD: Expect that the USD/SGD could be weighed by EUR buoyancy in trades today; extended dips below 1.3550 could be vulnerable to a squeeze though. Intraday range of 1.3535-1.3650 is seen for now.

USD/IDR: Further easing in the USD/IDR could be in the pipeline given bond and equity market inflows; range of 8900-9000 should be dealt for now; 8880 is the next support. Overnight NDFs traded 8908-8950; closed 8900-8930 from 8920-8950 open. Jul CPI and June trade data watched today.

USD/MYR: Downside bias seen in the USD/MYR playing catch-up with the USD/SGD; expect that dips below 3.1750 could be targeted with 3.1650 seen as the next support. Overnight NDFs traded 3.18760-3.1900; closed 3.1810-3.1860 from 3.1900-3.1940 open.

USD/PHP: Sellers should pressure the USD/PHP to test below 46.35 next though sustained retreats could be hampered by underlying uncertainty. Intraday range of 45.30-45.65 is seen. Overnight NDFs closed 45.55-45.65 from 45.63.-45.73 open.

USD/THB: Some downside bias in the USD/THB expected to be dealt in the 32.15-32.25 range. Jul CPI data awaited t oday.

USD/INR: Further pressure on the USD/INR is in the making with 46.20 seen as the next good support ahead of the 46.00-figure. Trade data for Jun to be released later. Overnight NDFs traded 46.60-46.75; closed 46.58-46.63 from 46.75-46.80 open.

Source : fxmarketalerts.com