Asian Market Update

Daily Forex Fundamentals | Written by Trade The News | Feb 19 09 05:37 GMT |

Nikkei Pares Gains Ahead of BOJ Decision as Exporters Cheer JPY Decline; China Hedges Rio Tinto Uncertainty, Maintains Appetite for Aussie Miners; Gold, Dollar Lose Marginal Ground The uncertainty that was on display in the US equity markets has carried over into Asia, where indices traded mixed in the early part of the session. Tokyo's Nikkei was firm out of the gate with a 1% rally, bolstered by weakness in the Japanese Yen translating into strength among the major exporters. Automakers Toyota and Honda were up by over 2% and 3.5% respectively, while consumer electronics staples Canon and Sony registered 1% and 2.5% gains going into the midday break. The broader index has lost some of its luster by midsession, in thin trading ahead of the BOJ decision in latter part of the session. Although there is virtually zero change the policy committee will move from its current 0.10% rate, markets are expected to monitor for hints of alteration in economic assessment and BOJ's outlook on quantitative easing. Bank of Japan's latest decision and recent rhetoric have been particularly dovish, leading to early profit-taking among the bullish camp. Among notable decliners, Japan airlines traded heavy after reports the company was still considering requesting government loans, Bridgestone opened sharply lower after announcing plans to cut its CAPEX by 15-30% from prior estimated levels, and Elpida was down on broad chipmaker sector selling following poor outlook from HPQ in the US that saw its shares drop over 5.5% in afterhours post-earnings freefall. Separately, as reported in Japanese press, Japan's govt was rumored to promote credit for lenders by easing rules for repaying bank aid and to waive taxes on gains of sovereign wealth funds. Sydney's S&P/ASX led the regional indices with a 1.2% gains going into the final hour of trading, boosted by commodity names reporting and receiving overseas interest. Fortescue Metals, borrowing a page from the playbook of the asset sale driven rally at Rio Tinto, dominated the headlines once again after confirming talks with a new suitor. China's Hunan Valin Iron and Steel, backed by A$3B pledge from Chinese sovereign wealth fund confirmed its interest, while Fortescue fanned the media attention to the tune of another double-digit gain, stating that it was in discussion with a range of parties. Rio Tinto staged its own 2% rally, however UK media rumors that British Insurers (ABI) may issue a 'redtop' corporate governance alert to RIO investors weighed on post-Chinalco announcement sentiment. Gold producers Newcrest and Lihir traded near flat levels as spot prices in gold retraced $10 below $980, while Woodside Petroleum gained 1.5%. In Seoul, South Korea's Kospi traded with the heaviest tone among its peers, dropping over 1% earlier in the session on geopolitical and financial crisis concerns. North Korea engaged in more vociferous saber-rattling, stating that it was ready for war with the South. Meanwhile, Bank of Korea Governor's comments on $24.5B in foreign debt on the books of Korea's banks with $10.4B due in March spooked investors despite the BOK pleas that rumors of a 'March crisis' were groundless. In notable Kospi names, chipmakers Samsung and Hynix tracked post HPQ sector weakness with over 1% losses, Hyundai shed 1.5%, and Posco was unchanged. In currencies, the greenback was once again sold off in Asian hours amid profit-taking of large recent gains. EUR/USD rose toward 1.29, USD/CHF broke below 1.1750 intraday support, and GBP/USD moved up nearly two big figures from intraday low of 1.41. In commodity FX, AUD/USD closed in on pivotal former support turned resistance 0.6430, while NZD/USD rose to session high of 0.5130. Japanese Yen consolidated sharp declines seen in US hours, ranging at 93.50-94 ahead of BOJ. As of the time of writing, Spot Gold is marginally higher, after gaining by more than $10 during the NY session. The NY intraday high was around $988 and so far today's Asian session high is around $988/oz. Today's gold gains come amid continuing physical demand for the metal and concerns about how governments will respond to the financial crisis. The world's largest gold ETF, SPDR Gold Trust holdings of bullion rose to another record high of 1,024 tons vs. 1,008 on 2/17. Crude oil is marginally higher, after falling by more than 1% during the NY session. Earlier today, the API disclosed that during the prior week, crude inventories were lower than expected, while gasoline and distillate inventories exceeded expectations. (API PETROLEUM INVENTORIES: CRUDE: +1.57M V +3ME; GASOLINE: +1.64M V -500KE; DISTILLATE: -875K V -1.5ME) Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. 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