Article / 09 June 2016 at 2:44 GMT

Morning Report APAC: BoK surprises with rate cut as RBNZ holds

APAC Sales Trading Desk / Saxo Capital Markets


  • Reserve Bank of New Zealand maintains its benchmark interest rate at 2.25%
  • NZD rose to its highest level since June 2015
  • Bank of Korea unexpectedly cut its benchmark rate to 1.25% from 1.50%
  • Oil advanced for a fourth day on falling US inventories

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time – GMT + 8)
0500: NZD – RBNZ Official Cash Rate (Act. 2.25%, Exp. 2.25%)
0900: KRW – BOK 7-Day Repo Rate (ACT. 1.25%, Exp. 1.50%) 
0930: CNY  – CPI YoY (Exp. 2.2%, Prev. 2.3%) 
0930: CNY  – PPI YoY (Exp. -3.2%, Prev. -3.4%) 
1400: EUR – Germany  Trade Balance (Exp. 22.8B, Prev. 26.2B) 
1400: EUR – Germany Current  Account Balance (Exp. 21.0B, Prev. 30.4B) 
1400: EUR – Germany Exports MoM (Exp. -0.8%, Prev. 1.9%), Imports MoM (Exp. 1.3%, Prev. - 2.3%) 
2030: USD – Initial Jobless Claims (Exp. 270k, Prev. 267k), Continuing Claims (Exp. 2,171,000, Prev. 

0910: NZD – RBNZ's Graeme Wheeler at Parliament Select Committee

1500: EUR – ECB's Mario Draghi speaks at Economic Forum in Brussels 

2230: CAD – BOC releases Financial Review; Stephen Poloz holds press conference

Overnight news

US: The pace of hiring by US employers slowed to near a two-year low during April. The Job Openings and Labour Turnover Survey showed that the pace of hiring fell to 3.5% from 3.7% in March. The number of people hired fell to 5.1m from 5.3m in March and 5.5m in February. In contrast, job openings increased 118,000 to a seasonally adjusted 5.788m (exp. 5.675m).

New Zealand: The RBNZ maintains the benchmark interest rate at 2.25%. The bank says:

  • further policy easing may be required 
  • housing inflation is adding to financial stability concerns
  • NZD is higher than appropriate
  • inflation will strengthen on expected NZD depreciation 
  • NZD strength is holding down tradeables inflation 
  • there are many uncertainties around outlook
  • bank will continue to closely watch data flow

South Korea: Bank of Korea unexpectedly cut its benchmark rate to 1.25% from 1.50% as concerns rose that the government’s push to restructure indebted companies is putting pressure on the economy.

Brazil : Brazil's central bank BCB keeps rates on hold at 14.25%.


Foreign exchange


Even though economists predicted no rate cuts this time, the market was hoping for one and didn’t get it, which triggered strong buying in NZDUSD on mainly stop losses. Even the statement was not that bearish. NZD exploded higher, breaking the year's high and trading at the highest level since June 2015. We should see some offers at 0.7200, once the clean-up of short positioning is finished. 

In the same manner, AUDNZD collapsed to 2015 lows and technically has no support until 1.0400. 

Otherwise, the USD continues to sell off against most currencies, especially commodities currencies, following the strong rally in oil prices. USDBRL dropped 2.3%. USDRUB traded at 63.63, the low since November 2015 (USDRUB is down 26% this year).

Foreign exchange movement

Points in USDCNH are pushing the volatilities lower. The one-year ATM is now trading at 7.00, the low of the year. Our impression is that funds are getting out of their long USD call positions.




US sovereign bond prices were higher on Wednesday after the release of labour turnover and services  data, as the US Treasury Department auctioned $20 bn in 10-year notes at a high yield of 1.702%.  The bid-to-cover ratio, an indicator of demand, was 2.70, above a 10-auction average of 2.62. The US 10-year yield traded lower overnight, reaching a low of 1.7005 after trading at a high of 1.7125 at the open of the US equity markets. The US dollar continued to decline overnight, with the DXY hitting a low of 93.41.





The S&P 500 was up 0.33% as a decline in the USD booted large-cap stocks. Crude oil (light sweet) prices, sometimes seen as a “risk-on” indicator, surged to 2016 highs of 51.5, providing further support for equities.

It is interesting to note that the S&P is about 10 points away from its all-
time high of 2030 points, and this could provide a ceiling on the index as we move into this weekend.




The rally seen in Treasuries over the past two days has pushed lower the CDS indices, doing some catch -up. The main mover has been the Itraxx Europe.

HK Equity Preview

Closed for the Dragon Boat festival public holiday.

Japan Equity Preview

Analyst views: 

  • JPMorgan new coverage 
  • Askul (2678 JP): Overweight 
  • DeNA (2432 JP): Overweight 
  • Gree (3632 JP): Underweight 
  • Nexon (3659 JP): Underweight 
  • Nintendo (7974 JP): Overweight 
  • Rakuten (4755 JP): Overweight 
  • Square Enix (9684 JP): Overweight 

  • Asia Pile Holdings (5288 JP): Rated neutral plus at Iwai Cosmo Securities 
  • Hitachi Chemical (4217 JP): Raised to outperform at SMBC Nikko 
  • Japan Hotel REIT (8985 JP): Raised to buy at UBS 
  • Marubeni (8002 JP): Cut to equalweight at Morgan Stanley 
  • Sojitz (2768 JP): Raised to equalweight at Morgan Stanley 
  • Tohoku Electric (9506 JP): Raised to outperform at SMBC Nikko

Equity preview: 

  • Ihara Chemical Industry (4989 JP): Lowered operating profit forecast for full year ending Oct. 2016 by 19.6% to ¥3.7bn
  • Japan Airlines (9201 JP): Maintains no int’l fuel surcharge for tickets in Aug-Sep 
  • Suzuki Motor (7269 JP): Executives including CEO Osamu Suzuki and COO Toshihiro Suzuki to attend 5:30pm news conference today; executive VP Honda to resign, Nikkei reports 
  • Tokyo Rakutenchi (8842 JP): Reported operating profit fell 22.3% y/y to ¥300m in Q1 ended April 30

Australia Equity Preview

  • Fisher & Paykel Healthcare (FPH NZ) raised to neutral vs sell at UBS 
  • Woodside Petroleum (WPL AU) cut to underperform at Credit Suisse 
  • Kathmandu (KMD NZ) rated new buy at Canaccord Genuity 
  • South32 (S32 AU) raised to outperform vs neutral at Exane BNP Paribas 

Source: Bloomberg / CIMB



We should see some offers for NZD at 0.7200, once the clean-up of short positioning is finished. Photo: iStock

– Edited by Susan McDonald

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