Asian Market Update by TradeTheNews

Discussion in 'Trading' started by TradeTheNews, Feb 20, 2007.

  1. TradeTheNews

    TradeTheNews ET Sponsor

    Asian Market Update: Japanese press report that BoJ to hike rates by 25bps, but yen gains are limited

    - The Japanese press is reporting that BoJ governor Fukui will be proposing a rate hike of 25bps at today's BoJ meeting. On the announcement, the JPY gained about 40pips against the USD, 70pips against the EUR and about 120pips against the GBP. The official announcement is still awaited, with further yen movement to be dictated by the outcome of the vote. If the vote is split (as was the case with the previous meeting when it was 6-3 to leave rates unchanged) we could see the yen continue to remain under pressure in the near term. After the initial knee-jerk reaction, the JPY gave up some of its gains as traders shifted focus back to rate differentials. The BoJ rate hike seems unlikely to be the start of a series of rate hikes, and for that reason yen is expected to remain under pressure in medium term. There was a relatively muted reaction among carry trade pairs after the leaked report, hinting that it will take more than a 25bps BoJ rate hike to lead to significant unwinding of carry trades. Japanese press is also reporting that the Japanese government is unlikely to request a vote delay.

    - Aussie Q4 wage price index came in slightly stronger than expected (QOQ: 1.1% V 1.0% expected; YOY: 4.0% V 3.9% expected). Year rises in the wages indices in the various industries ranged from 2.0% for the services sector to 6.5% for the mining sector. The wage price data showed that it is too early for the Reserve Bank of Australia to declare victory on inflation, a view echoed by RBA governor Glen Stevens. Stevens said that the central bank is "more confident" inflation will moderate, and that "there are still some forces that give (them) pause for thought" such as wages and producer prices. Stevens reaffirmed that the RBA has a tightening bias, but the Aussie dollar gained as markets saw Stevens' comments as showing that the RBA is willing to act again to stop inflation.

    - March Nikkei 225 futures traded lower as dealers saw fairly large sell orders for between 300 and 500 contracts each soon after the leaked press reports on the BoJ rate hike. Japanese banking stocks surged on the press reports. Asian steel stocks once again gained on the back of M&A speculation. The ASX200 is down slightly in flat trading. Australia's Tabcorp posted a 3.6% fall in first-half profit today, partly due to the impact of smoking bans at its casinos. Hong Kong's phone stocks traded up after China Mobile said it added a record number of customers for a fourth straight month.

    - Commodities: London Metal Exchange nickel and tin at record highs on Wednesday, with lead just short of all-time peak hit the previous day. Technical analysts at BNP Paribas are saying that spot gold has physical support at $655, but bearish divergence on relative strength index cold trigger chart-based selling in the short term. Oil prices declined in Asian trade on forecasts of warmer US weather.