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Market Musing, Asia Pacific

14 Sep 2023

AUD: Always darkest before the dawn

The AUD is battered and bruised. A combination of factors such as better-than-anticipated US data and a stronger USD, economic struggles in China and a weaker CNH, a lower JPY, some subpar local economic prints, and shaky risk sentiment on the back of the jump up in bond yields recently pushed the AUD to 2023 lows. While the extent of the USD strength and AUD weakness has been a bit of a surprise, the direction of travel was not. We repeatedly flagged that the AUD was set to go through a rough patch over Q3 as global inflation lingered and...

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16 Aug 2023

Cross-Check: AUD/NZD – Stay the course

As was widely expected the RBNZ kept its Official Cash Rate at 5.5% once again at today’s meeting. After moving early and going harder than its peers the RBNZ has now held rates steady for two straight meetings. The RBNZ delivered a substantial 525bps worth of rate hikes between October 2021 and May 2023 and the negative economic effects of these moves are starting to manifest. We expect these negative trends to continue as the cashflow hit on the NZ household sector intensifies and slowdown in other interest rate sensitive sectors like housing/construction spills over into the broader economy and...

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08 Aug 2023

History doesn’t repeat, but…

“History Doesn’t Repeat Itself, But It Often Rhymes”. Based on our analysis of seasonal performance this statement seems to hold true for several currencies and other important financial markets. For the aficionados although we found no ‘stable statistical seasonality’, there seems to be a lot of ‘coincidence’ as a variety of things such as production and trade trends, financial year end related flows, asset allocation changes, and/or thinner liquidity conditions during the Northern Hemisphere summer or Christmas period compound or counteract unfolding macroeconomic developments. Our Seasonality Heatmaps, provided at the bottom of this note, illustrate the average monthly performance of...

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12 Jul 2023

Cross-Check: AUD/NZD – Diverging trends

As was universally expected the Reserve Bank of New Zealand kept its Official Cash Rate at 5.5% at today’s meeting. This is the first time the RBNZ has not raised the OCR since the August 2021 meeting. The RBNZ went early and hard, delivering an eye-watering 525bps worth of rate hikes between October 2021 and May 2023. As a result, policy settings in NZ are well into ‘restrictive’ territory (i.e. above the estimated equilibrium ‘neutral’ rate). From our perspective, the underlying message from the RBNZ and developments across the NZ economy suggest that without another positive inflation shock the move...

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26 Jun 2023

JPY: Asymmetric risks building

It has been one-way traffic for the JPY over recent weeks. The JPY has depreciated rather sharply against a range of other currencies, including the USD, AUD, and SGD since the Bank of Japan disappointed markets by maintaining its ultra-accommodative stance in late-April. Over the same period interest rate expectations for other major central banks like the RBA, Bank of England, and US Fed have risen (to differing degrees) due to ongoing inflation pressures, while market sentiment has also generally been positive. Given where USD/JPY, AUD/JPY, SGD/JPY, and the JPY more broadly are now trading, we think the distribution of...

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