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Yen Rises On Risk Aversion, RBA On Hold

Published 04/05/2016, 02:39 AM
Updated 03/09/2019, 08:30 AM
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Asian markets are generally lower as dragged down by Fed's rate talk as well as oil price. Yen gains broadly on risk aversion. Boston Fed president Eric Rosengren said that market pricing of Fed's hike was "too pessimistic". And, "if the incoming data continue to show a moderate recovery -- as I expect they will -- I believe it will likely be appropriate to resume the path of gradual tightening sooner than is implied by financial-market futures." Minneapolis Fed president Neel Kashkari said that he is "comfortable" with the current monetary stance and expects "moderate" growth ahead. Meanwhile, crude oil dipped through key near term support of 35.96 and should head further south towards recent low at 26.05.

RBA left cash rate unchanged at 2.00% as widely expected. The central bank maintained that " there were reasonable prospects for continued growth in the economy, with inflation close to target". And, "continued low inflation would provide scope for easier policy, should that be appropriate to lend support to demand." Aussie recovers mildly after the release. Also from Australia, trade deficit widened to AUD -3.41b in February versus expectation of AUD -2.55b. Exports dropped, -1.0% mom, -8.5% yoy while imports were relatively unchanged mom and dropped -2.0% yoy. The deterioration in exports reflected soft global economic conditions as well as the rebound in Aussie's exchange rate.

In Japan, BoJ governor Haruhiko Kuroda told parliament that "for now, the effect of negative interest rates is very strong so we'd like to steadily proceed with this policy." He emphasized the need to "take a comprehensive look at various factors in deciding (the best mix of steps) at the time including market moves, particularly those in Japan." And the next move will depend on the development while BoJ "won't necessarily choose a rate cut just because it's easier to do so". Regarding the economy, in spite of the weak Tankan survey result, Kuroda maintained that it's recovering moderately. Released from Japan, labor cash earnings rose 0.9% yoy in February.

Looking ahead, UK services PMI will be the main focus in European session and is expected to show improvement to 53.8 in March. Eurozone will release PMI services PMI final, retail sales and German factory orders. US and Canada will release trade balance but ISM non-manufacturing will be the main focus.

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