Dollar Soft As US Shutdown Looms, Yen Dives On Strong Tankan

The dollar stays soft in Asian session as the first US government shutdown in 17 years looms. There were hope of a temporarily funding extension, but that was dented as politicians failed to agree on anything. The selloff in US equities and dollar weren't too bad with DOW just closing -128.57 points lower at 15129.67. 10 year bond has indeed rose slightly with yield dropped -0.004% to 2.615%. Markets seemed to be able to cope with closure of non-essential government services on a temporary basis. The main challenge is for politicians to come up with deal on debt ceiling by October 17, when the US government will run out of money. Economists warned that lack of resolution by then could trigger a panic situation.

RBA will announce rate decision during the Asian session and is expected to keep rates unchanged at 2.50%.

Updated: The RBA left the cash rate unchanged at 2.5% in October with policymakers anticipating the effects of previous cuts would continue to be reflected in the economy. That said, the central bank did not rule further monetary easing and affirmed that it would continue to assess the economic developments and act accordingly. The RBA noted economic growth was below trend while inflation was on target. It also echoed previous comments and expressed concerns about the rising prices in the property market. More in RBA Left Cash Rate At 2.5%

The yen dropped sharply today after strong upside surprise in the closely watched quarterly Tankan survey. The large manufacturers index jumped to 12 in Q3, up from 4 in Q4 and beat expectation of 7. That's the highest reading since Q4 in 2007. The non-manufacturing index also rose to 14, up from 12, and meet consensus. Readings in other categories also showed general improvements. Economists noted that the survey is a clear reflection of the spreading positive impact of yen's depreciation and Abenomics. And it's viewed that the upturn in the economy is becoming more sustainable than previously thought. Also released from Japan, house hold spending dropped -1.6% yoy in August, unemployment rose to 4.1%. Prime minister Abe is due to outline tomorrow the sales tax hike plus any offsetting measures.

Released from China, the official PMI manufacturing index rose to 51.6 in September, up from 51.0, meeting expectations. Recent data has been mixed with HSBC PMI manufacturing, showing less than expected expansion at 50.2. Looking ahead, PMI data will be a major focus today. Swiss, Italy, Eurozone and UK will release PMI manufacturing. Germany and the eurozone will release unemployment rate. In the US, ISM manufacturing index and construction spending will be featured.