ASIA is doing its bit too

The BoJ and PBoC did their bit and helped take some heat off a burdened Euro financial system. Japan took part directly in coordinated actions to provide liquidity support to the global financial system. China, she took the internal route and cut its domestic banks reserve ratio. The PBoC actions is supposed to provide support for global growth expectations and growth sensitive assets. Looking at Friday’s price action, capital markets fear that Europe is on the verge of imploding again. In reality, very few want to own risk ahead of next weeks Central Bank rate announcements and the now highly anticipated Euro summit.

Below are some other highlights of the week:

ASIA

• NZD: NBNZ activity outlook index rose to 28.8 this month from 26.1.
• PHP: Q3 GDP rose +3.2%, y/y, less than the +4.1% consensus forecasted. The Q2 growth number was revised down-0.3pts to +3.1%. The weak export and manufacturing sector continues to be a drag on growth.
• THB: IP collapsed in October. Manufacturing production fell -35.8%, y/y, much more than the -15% drop consensus had forecasted. The collapse was due to the extreme flooding in much of central Thailand. Capacity utilization dropped from +65.5% in September to +46.4% in October. Immediate term, problems are to persist.
• JPY: Retail sales rose +1.4%, m/m, in October, up from a contraction of -1.5% the prior month and stronger than the consensus forecast for a +0.6% rise. However, the October unemployment rate rose to +4.5% from +4.1% in September.
• JPY: BoJ Governor Shirakawa told Japan’s parliament that he viewed yen strength as being due to credit stress in Europe and hoped that their efforts to lower long-term Japanese yields would weaken the yen.
• KWN: Current account surplus was +$4.2b in October, down from +$5.1b in October 2010. The trade surplus of +$3.6b is expected to rise if oil prices soften further.
• INR: The RBI has warned banks not to use “their open position allowances to run speculative long USDINR positions lest the RBI change regulations”.
• MYR: The government announced that foreign direct investment into Malaysia rose +42% in the first three-quarters of 2011 to +$8.3b.
• CNY: China’s repo rate fell to a 5-day low of +3.66% midweek. The recent increase in fiscal spending is adding more liquidity to China’s financial system than the PBoC has sterilized with bill issuance.
• AUD: Aussie was able to breach parity midweek after Fitch upheld its long-term foreign currency rating. It was upgraded to AAA from AA+, citing low government debt levels and a flexible policy framework. Also aiding was the OECD forecasting that Australia would be the one of the fastest growing economies in the world in 2012.
• CNY: PBoC announced it would lower its required reserves ration by-50bp to +21.5% (first easing in three-years) and should provide support for global growth expectations and growth sensitive assets. Bigger picture, alone not enough to offset the acute danger to financial market stability stemming from the euro sovereign crisis for long.
• Most of the world’s major central banks (Fed, ECB, BoE, BoJ, BoC and SNB) agreed that they would take “coordinated actions to enhance their capacity to provide liquidity support to the global financial system.” Specifically the Banks have cut the price on existing temporary US dollar swap arrangements to USD OIS plus 50bp which is a cut of about 50bp from what is currently charged. It will apply this from December 5 to February 1 2013.
• CBanks: Agreed to set up bilateral liquidity swap arrangements to cover any of their own currencies should that be needed.
• JPY: IP grew +2.4%, m/m, in October, which was stronger than expected and reversed the -3.3% fall in the prior month. However, the level of production is still lower than that in August by -0.9%.
• JPY: The MOF confirmed that October intervention totaled JPY9.1t . Most of this is believed to have occurred in a single day, which would mark a new record for intervention.
• AUD: Capital expenditure rose a strong +12.3%, q/q, in Q3, much higher than the consensus forecast for +8.0%. Futures traders continue to expect the RBA to normalize rates, with another-25bp rate cut at this months meeting as inflation projections allow it.
• NZD: Building permits rose +11.2%, m/m, last month. This reversed much of the drop in permits from the previous month, pushing the rise in permits since June to +22.1%.
• IDN: Headline GDP for Q3 was in line, but with weak details. GDP growth slowed to +6.9%, y/y, in Q3 from +7.7% in Q2.
• KRW: IP fell -0.7%, m/m, largely reversing the +1.2% rise in September.
• CNY: China’s PMI fell-1.4pts to 49.0 in November, below the consensus forecast of 49.8. Details were soft with new orders and new export orders falling sharply and supports the PBoC’s decision to cut the commercial banks’ reserve requirement ratio this week.
• AUD: Building approvals and retail sales disappointed. Building approvals fell -10.7%, m/m, in October and follows the -14.2% drop in September. Retail sales rose a smaller than expected +0.2%, m/m, vs the consensus forecast for +0.4%.

AMERICAS Week in FX

EUROPE Week in FX

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