JP BoJ’s Uchida drops JPY back to 147 and juices the Nikkei

Asia market update: JP BOJ’s Uchida drops JPY back to 147 and juices the Nikkei, “Will not raise rates while markets are unstable”; Uchida to give Q&A at 05:30GMT/01:30ET; Sony and Softbank to report after the close; BOJ SOMP tomorrow.

General trend

- Japan BOJ’s Dep Gov Uchida shocked JPY down by Three Big Figures to the 147 handle and gave a boost to risk assets, including a struggling Nikkei, after saying that the BOJ would not raise rates (again) while markets are unstable. The effect on JPY was immediate. Nikkei also turned around to be up +4% (following yesterday's record ~10% rise) after having opened down by -1.6%.

- “The “Japan Effect” also continues to reverberate globally; The probability of a 50bps cut by the Fed in September fell from 65.5% to 62.5% following Uchida’s comments.

- It was a positive day for equities everywhere in Asia.

- Currencies everywhere rallied against the Yen (GBP by 4 Big Figures); elsewhere commodity currencies Aussie and Kiwi rallied against USD +0.7% and 1.0% respectively.

- Japan BOJ's Statement on Monetary Policy for last week's rate decision and 2-year bond-buying schedule will be eagerly pored over tomorrow.

- Japan 2-yr JGB yield -3.5bps at 0.253%, only a fraction above the BOJ’s new rate of interest rate of 0.25%.

- Earlier, USD/JPY had spiked +0.5% just after comments by Japan ruling-party (LDP) 'heavyweight' Ishiba, who said the BOJ is on the right policy track to gradually align with global interest rates and the ideal range for USD/JPY is 110-140.

- The Kiwi spiked +0.5% (later up +1.0%) on receiving some good news on the Q2 employment front, with a lower unemployment rate than expected as well as better hourly earnings and wages. However, the NZ Stats Agency warned that unemployment has been increasing since 2022, leaving the current quarter’s unemployment rate the highest since March 2021. Public sector wage inflation also reached a new high during the quarter, with the RBNZ due to give its next OCR decision on August 14th (Wed).

- China's massive trade surplus with the US at ~$85B for July was somewhat below the prior month’s record of nearly $98B. Exports fell, missing expectations, while Imports rebounded from the prior negative print. CNH extended drop post-trade figures, having already been weighed down by yen weakness.

- US equity FUTs +0.9% to +1.2% during Asian trading.

Looking ahead (Asian time zone)

- Thu Aug 8th JP Summary of Opinions (July 31st meeting), AU NAB July Bus Confidence, CN July Balance of Trade, RBI rate decision.

- Fri Aug 9th CN July CPI.

Holidays in Asia this week

- Fri Aug 9th Singapore.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 7,673.

- RBA Asst Gov (Econ) Hunter: Focusing more closely on Trimmed Mean CPI for now (inline) - Parliament testimony on Cost of Living.

- Australia sells A$800M vs. A$800M indicated in 2.75% Jun 2035 bonds; Avg Yield: 4.1218% v 4.1816% prior; bid-to-cover: 3.38x v 2.21x prior.

- New Zealand Q2 Unemployment Rate: 4.6% v 4.7%e.

- Fonterra Global Dairy Trade Auction Dairy Trade price index: +0.5% v +0.4% prior.

- Reserve Bank of Australia (RBA) Gov Bullock: Board judges the current level of OCR to be appropriate to balance CPI and employment outlook - post-rate decision press conference; Board did consider an interest rate rise, but decided to hold [overnight update].

China/Hong Kong

- Hang Seng opens +0.2% at 16,684; Shanghai Composite opens -0.1% at 2,864.

- China July trade balance: $84.7B V $98.2BE.

- China July trade balance (CNY-denominated): 601.9B V 703.7B prior.

- (UK) Reportedly UK Foreign Sec Lammy is considering making a visit to China – press.

- China PBOC sets Yuan reference rate: 7.1386 v 7.1318 prior.

- China PBOC Open Market Operation (OMO): Sells CNY0B in 7-day reverse repos; Net drains CNY252B v net drains CNY216B prior.

Japan

- Nikkei 225 opens -1.6% at 34,122.

- Japan July Total Reserve Assets: $1.22T v $1.23T prior.

- *(JP) Bank of Japan (BOJ) Dep Gov Uchida: Will not raise rates while markets are unstable.

- Japan ruling-party (LDP) 'heavyweight' Ishiba: BOJ is on the right policy track to gradually align with global interest rates; Ideal range for USD/JPY is 110-140.

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1-3 Years; 3-5 Years and 10-25 Years (Inline; Reduced bond-buying schedule for Aug, post-BOJ decision July 31st).

- Japan top FX Diplomat Mimura: No change in overall assessment that domestic economy is recovering [overnight update].

South Korea

- Kospi opens -0.3% at 2,515.

- South Korea Jun Current Account: $12.3B v $8.9B prior.

- Samsung Electronics: Reportedly Nvidia clears Samsung 8-layer HBM3E chips for use in AI chipsets, but 12-layer HBM3E chips have not yet passed Nvidia qualification tests - press.

Other Asia

- India considering to cut food weight in CPI by up to 8ppt - financial press.

- Taiwan July CPI Y/Y: 2.5% v 2.5%e.

North America

- (US) Jun trade balance: -$73.1B V -$72.5BE.

- (CA) Canada Jun int'l merchandise trade (CAD): +0.6B V -2.0BE.

- (US) Harris chooses GOV. TIM WALZ (D-MN) as her VP pick - CNN.

- (CA) Canada July Services PMI: 47.3 v 47.1 prior; (2nd straight contraction).

- (US) Treasury's $58B 3-year note auction results: Draws 3.810% V 4.399% prior, bid-to-cover ratio: 2.55 V 2.67 prior and 2.62 over the last 8 auctions.

- (US) US Biden admin seeking 3.5M barrels for Strategic Reserve.

Europe

- (IL) Hezbollah leader Nasrallah: To target new sites deeper into Israel - TV.

Levels as of 01:20 ET

- Nikkei 225 +4.2%; ASX 200 +0.7%; Hang Seng +1.9%; Shanghai Composite +0.6%; Kospi +2.5%.

- Equity S&P500 FUTs +0.9%; Nasdaq100 FUTs +1.1%, Dax +1.3%; FTSE100 +1.2%.

- EUR 1.0909-1.0933: JPY 144.30-147.49; AUD 0.6510-0.6565; NZD 0.5943-0.6018.

- Gold +0.1% at $2,434/oz; Crude Oil +0.6% at $73.66/brl; Copper +0.2% at $4.0158/lb.