JPY Outperforms As AUD, NZD Recede

The Australian Dollar was mostly weaker against major peers through the European session as AUD/USD came off to US$ 0.9403, EUR/AUD appreciated to A$ 1.4428, AUD/JPY fell to to ¥91.30, and AUD/CHF depreciated to CHF 0.8504. Today’s economic data saw the AiG September performance of construction index improve to 47.6 from the prior reading of 43.7. AUD gave back some of Friday’s gains that were earned in reaction to evolving interest rate expectations in Australia. There is now about a 69% chance the RBA will keep its benchmark lending rate unchanged at 2.5% during its policy meeting on 3 December. Aussie banks are now eyeing February and May as the months when RBA is likely to ease monetary rates. Tuesday’s data will include NAB September business conditions and ANZ September job advertisements followed by Wednesday’s Westpac October consumer confidence and Thursday’s labour market and employment numbers. The World Bank trimmed its Chinese GDP forecast for 2013 to 7.5% from the prior 8.3% reading.

The Japanese yen appreciated against major rivals through the European session as USD/JPY faded to ¥97.01, EUR/JPY depreciated to ¥131.62, GBP/JPY moved lower to ¥155.60, and CHF/JPY slumped to ¥107.20. JPY was bid from the weekly open as traders continue to embrace a risk aversion strategy on account of US political uncertainty. PM Abe spoke at the APEC summit and said Japan “must make certain deflation is swept away,” an indication his government and BoJ will continue to pursue policies to create inflation. BoJ’s October monthly report noted the economic is recovering moderately. BoJ kept monetary policy unchanged last week and will continue to pursue a pro-inflation policy. Today’s Japanese data saw the August leading index recede to 106.5 while the August coincident index ticked lower to 107.6. Also, September official reserve assets expanded to US$ 1.273 trillion from the prior reading of US$ 1.254 trillion. Japanese trade balance numbers will be released on Tuesday. The Nikkei 225 stock index fell 1.22% to ¥13,853.32.

The Swiss franc was up against most major currencies through the European session as USD/CHF fell to CHF 0.9036, EUR/CHF weakened to CHF 1.2264, GBP/CHF came off to CHF 1.4489, and CAD/CHF depreciated to CHF 0.8763. Friday’s news from FINMA that it is spearheading a multi-jurisdictional investigation into FX rates collusion saw CHF decline by the largest amount since 5 September but CHF rebounded today. Swiss data released today saw September foreign reserves tick marginally higher to CHF 432.4 billion from the prior reading of CHF 432.2 billion. Swiss data due this week include September employment data on Tuesday along with September CPI and August retail sales.

The U.S. Dollar sought direction against its peers through the European session as EUR/USD strengthened to US$ 1.3575, GBP/USD gained to US$ 1.6050, USD/CAD bettered to C$ 1.0316, and NZD/USD fell to US$ 0.8276. US Speaker of the House Boehner this weekend warned the US could end up defaulting on its debt unless President Obama negotiates with congressional leaders. The US government shutdown is now in its seventh day and Treasury Secretary Lew reiterated the US will lose its ability to borrow on 17 October. Moody’s today indicated a “very low” chance the US will default, adding the US’s “debt ceiling” will restrict new borrowing but not the US’s servicing of prior obligations. US Treasury markets are starting to price in a greater possibility of a default as one-month Treasury bill yields have climbed to their highest level in 4.5 years. G20 central bankers and finance ministers convene in Washington, D.C. this Thursday. Dallas Fed’s Fisher on Friday reported the US “can’t dare to default on its debt” and Minneapolis Fed’s Kocherlakota said the FOMC is “falling short” on its dual mandate. Richmond Fed’s Lacker said the labour market has improved significantly and expects inflation will return to 2% in the coming quarters.

Gold and Silver moved higher through the European session as Gold climbed to US$ 1316.06 and was supported at $ 1311.54 while Silver appreciated to US$ 21.865 and was supported at US$ 21.695. The Metals complex continued to seek direction from the ongoing US government shutdown, and its impact on the near-term trajectory of US monetary policy. A decision by the Fed to taper QE3 policy will likely have a dampening impact on Gold and Silver as less speculative capital would be in the capital markets. Central banks are expected to end Q4 having added about 350 tons of Gold bullion to their balance sheets this year, down from an estimated 535 tons in 2012, the most since 1964. Central banks and monetary authorities own an estimated 18% of the Gold that has ever been mined but have lost about US$ 545 billion in market value since Gold peaked in 2011. Along the same lines, the value of Gold exchange-traded products has declined about 43% in 2013.

Crude Oil was offered through the European session as Brent futures slumped to US$ 108.02 and were capped at $108.46 while WTI futures depreciated to US$ 102.82 and were capped at $103.35. US Secretary of State Kerry reported the US and Russia agree that there is no military solution in Syria. Tropical Storm Karen weakened as it approached the Gulf coast in the US and energy prices have fallen as a result. Approximately 62% of Gulf oil production and 48% of natural gas output were shut as the storm approached but major producers have resumed operations. The ongoing political stalemate in the US is likely to keep energy prices capped as the shutdown of the US government results in less demand for crude products.