JPY Moves Down As AUD, NZD Rally; Metals Are Mixed, Oil Is Lower

The Australian Dollar was broadly stronger against major peers through the European session as AUD/USD strengthened to US$ 0.9483, EUR/AUD depreciated to A$ 1.4273, AUD/JPY climbed to ¥93.42, and AUD/CHF appreciated to CHF 0.8643. Australia sold A$ 800 million in 3-year bonds with a healthy 4.28 oversubscription. In M&A activity, Westpac agreed to purchase UK’s Lloyds assets in Australia for a reported A$ 1.45 billion, a deal that may not have many FX implications. Yesterday’s Australian data saw October inflation expectations climb to 2.0% from the prior reading of 1.5%. Also, September employment reversed and was up +9,100 from a revised -10,200 in August as the unemployment rate moved lower to 5.6% from the prior 5.8% level. PBoC’s Yi said the central bank is closely monitoring the impact of the US government shutdown, adding the “market doesn’t like uncertainties.” It was reported PBoC and the ECB have agreed to establish a bilateral swap line to facilitate EUR/CNY transactions. The size of the swap line is a reported CNY 350 billion/ €45 billion.

The Japanese yen depreciated against most major rivals through the European session as USD/JPY gained to ¥98.54, EUR/JPY appreciated to ¥133.44, GBP/JPY moved higher to ¥157.50, and CHF/JPY rallied to ¥108.23. BoJ Governor yesterday said the central bank’s asset purchase program has “been exerting its intended effect, which is quite encouraging…we are convinced that we will definitely overcome deflation…the economy is on track…the real economy, prices, and expectations – all of them are improving as we intended.” Some Japanese officials are suggesting BoJ’s direct debt purchases of one-year Japanese bills may not climb much from this year’s ¥11.7 trillion. Finance minister Aso called for an “early resolution” to the US’s debt issues. Japanese data today saw the September domestic corporate goods price index climb +0.3% m/m and +2.3% y/y.

The British pound was mixed against major currencies through the European session as GBP/USD gained to US$ 1.5992, EUR/GBP came off to £0.8460, GBP/CHF climbed to US$ 1.4538, and GBP/AUD weakened to A$ 1.6851. As expected, BoE’s MPC kept monetary policy unchanged with the benchmark lending rate at 0.50% and its asset purchase programme at £375 billion. The MPC’s forward guidance suggests the MPC will likely not raise interest rates until the unemployment rate declines and stabilises around 7.0%. Data to be released in the UK today include August construction output.

The U.S. Dollar underperformed against its peers through the European session as EUR/USD gained to US$ 1.3543, USD/CHF slumped to CHF 0.9096, USD/CAD fell to C$ 1.0387, and NZD/USD gained to US$ 0.8324. Political wrangling over the ongoing US government shutdown continued en masse yesterday after Senate Democrats said negotiations will only take place after the government reopens and a debt deal is reached. Obama indicated he sees “progress” on the debt ceiling stalemate but rejected a Republican proposal to end the impasse. Ratings agency Fitch indicated the US will likely reach a debt deal but warned there may be ratings implication in the standoff. House Republicans expressed some optimism that a deal to reopen the government and extend the debt limit might be reached today. Russian finance minister Siluanov reported Treasury Secretary Lew and Fed Chairman Bernanke indicated they see solutions to the debt deal. One proposal might see the debt ceiling limit delayed until 22 November. Data due in the US today include the mid-September University of Michigan consumer sentiment number.

Gold and Silver were mixed through the European session as Gold climbed to US$ 1294.21 and was supported at US$ 1284.74 while Silver depreciated to US$ 21.528 and was capped at US$ 21.840. The Metals complex took some cues from increased optimism that a debt accord and a deal to reopen the US government might be reached soon. Gold is expected to notch its first losing year in thirteen years in 2013 and some major US banks are speculating Gold will continue to move lower next year. Investors have sold an estimated 711.8 metric tons from Gold bullion-backed exchange-traded products in 2013, knocking approximately US$ 61 billion in value from the company with holdings now around 1,920 tons, the least since May 2010.

Crude Oil depreciated through the European session as Brent futures weakened to US$ 110.55 and were capped at $110.84 while WTI futures depreciated to US$ 102.46 and were capped at $102.79. Yesterday, the abduction of Libyan Prime Minister Ali Zaidan in Tripoli added to the move higher in the Oil complex as that country tries to restore resolve labour disputes and restore production and exports. Daily Libyan output recently improved to 700,000 barrels per day. EIA data released in the US this week saw crude stockpiles climb by 6.8 million barrels last week, the most since 14 September. US refineries reduced operating rates to an average 86% capacity, the lowest level in more than five months.