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Market Musing, Asia Pacific

RBA: No retreat, No surrender

No shock and awe from the RBA today, but its underlying tone did lean a little more ‘hawkish’. The cash rate was held steady at 4.35%, where it has been since last November, with the Board also reiterating it needs to “remain vigilant to upside risks to inflation” and that it “is not ruling anything in or out” when it comes to future moves. This is now a somewhat familiar mantra, and although the hurdle for another hike looks high the chances aren’t zero with the start of the RBA’s easing cycle appearing some time away. Getting consumer prices down...

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AUD/NZD – Another round of RBNZ Shock & Orr

The RBNZ kept interest rates steady at 5.5% at today’s meeting. No surprises. But in a shock to market analysts and the NZD, the RBNZ’s tone and updated projections were more ‘hawkish’. The RBNZ is still grappling with a growth/inflation trade-off, and the latter continues to win out, for the time being at least. Despite the increasingly apparent weakness in the NZ economy (GDP has contracted in 4 of the past 5 quarters even with robust population growth) and widening cracks in the labour market (NZ’s unemployment rate has risen by ~1%pt the past year) concerns about inflation are (still)...

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AUD outperformance to continue?

The AUD has had the wind at its back over the past few weeks with an over 5% jump from its late-April Israel/Iran risk aversion lows coming through. This has pushed AUD/USD (now ~$0.6690) to a ~4-month high. The AUD has also outperformed on many of the major crosses. AUD/EUR (now ~0.6145) and AUD/GBP (now ~0.5271) are hovering at the upper end of their respective multi-month ranges. AUD/CAD (now ~0.91) touched its highest level since last June, AUD/CNH (now ~4.83) is back up where it was in early-January, and despite a modest dip more recently AUD/NZD (now ~1.0920) is also...

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USD/JPY & AUD/JPY: A line in the sand?

The wild ride in the JPY over the past few trading sessions has got the markets attention, and raised the question of whether Japanese authorities have (finally) intervened after firing several verbal warning shots? USD/JPY traded in a 3.6% range on Monday, around 4 times its historical norm, as it quickly plunged from a fresh multi-decade peak just above 160 before settling down (now ~156.70). Officials from Japan have kept markets guessing by not confirming or denying whether any action took place. But as the saying goes “if it walks like a duck and quacks like a duck then it...

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RBA wordplay, BoJ adjustment

Some central bank action in today’s Asian session with the RBA and Bank of Japan meeting. The former had a bit of wordplay in its post meeting statement, while the latter finally relented and took steps to normalise its ultra-loose policy stance. Although market participants appear underwhelmed with the BoJ’s actions. The resultant lift in USD/JPY has flowed through and exerted downward pressure on the AUD. In terms of the RBA, as expected interest rates remained at 4.35%. In its view, while there are “encouraging signs” inflation is coming down it “remains high” and “the economic outlook remains uncertain”. As...

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