Bond Sell Off Hit Asia

The AUD is struggling in the face of higher US bond yields, but that only paints one side of the speculative landscape. As pointed out yesterday; domestic deflation demons were unlikely excised by the stronger than expected CPI headline, especially in the face of the downside miss on the trimmed mean. While the sentiment is running near nil for an RBA rate cut next week, bets are increasing that Dr Lowe may address the CPI miss along with this month’s destitute domestic employment print in next week’s statement. Given the scope for repricing of RBA rate cut expectations lower, and coupled with breadth for the US curve to reprice higher, the Aussie could find itself at the mercy of diverging policy expectations. Add in the US election risk premium and the Aussie will likely struggle for traction near term.

USDJPY continues trading in line with the US yield curve… The current view is that USDJPY could grind higher in the coming days. At a minimum, we should expect an upward shift in the short-term range to 104.75-105.75. However, a near-term break of 106 still feels unlikely with the Fed Dec rate hike premium all but factored; it seems a

 but it also  seems a poor risk reward for standing in front of the USD freight train suggesting traders will likely support dips to the 104.75-105 levels.”


This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes