Forex news for Asia trading for Thursday 15 October 2020

The Australian dollar was an early mover in the timezone, falling on the back of remarks from Reserve Bank of Australia Governor Lowe. Lowe shifted to a more dovish stance, committing again to not raising the Bank's cash rate until inflation is sustainably in the 2-3% range. Further, he gave indications that more RBA easing is to come entailing a cut to 0.1% for the cash rate, the 3 year yield target, and also likely expanded longer-term bond buying.

As noted already, the Australian dollar dropped. The market response was that further easing is imminent, with pricing now indicating a circa 75% chance of a cut at the November meeting (November 3 ... that's going to be an important date!) Analyst notes soon followed, with many tipping a Nov. 3 cut from the Bank. Its a conundrum, I didn't hear much from him indicating any sense of urgency and that November is likely. Given the priors from the RBA I'm unconvinced the November meeting will see a move. Contra what the market seems to think admittedly.

News flow was not limited to Dr. Lowe, also of note:

  • US Treasury Secretary Steven Mnuchin said getting a stimulus agreement before the election and executing on that would be difficult. (no surprise in this)
  • The People's Bank of China launched a 500bn yuan MLF operation (200bn mature this week thus a net injection of 300bn)
  • The weekly international securities flows data from Japan showed a whopping +$18bn of foreign bonds bought from Japan in the last week, the highest since March this year. You'll recall a persistent market narrative that Japanese are buying JGBs in preference to offshore bonds due to positive 'real' yield and thus this is keeping funds at home and contributing to yen strength. This huge weekly outflow runs a little counter to that.

Apart from the notable AUD move other currencies are not too much changed. USD/JPY is up 20 or so points from earlier lows and yen crosses are higher also (AUD/JPY of course not so much). Gold slipped lower a few dollars.

Forex news for Asia tradingfor Thursday 15 October2020