Yen Weakness Continues As China Data Lifted Risk Appetite

The yen's broad based weakness continued in Asian session today on risk appetite. Economic data released from China eased worry on tightening and boosted Asian equities higher. Headline CPI eased to 3.0% in November from an 8-month high of 3.2%. Food inflation, easing to 5.9% yoy from 6.5% in October, remains the main driver of overall inflation, although both food and core inflation moderated slightly. Merchandise exports climbed 12.7% yoy in November, up from 5.6% a month ago and consensus of a 6.5% increase. Seasonally adjusted, export grew 13.2% in November. Imports rose 5.3% yoy, down from 7.6% in October. Seasonal adjusted, November import growth accelerated to 9.3% yoy, up from 2.7% in October and confirming a pickup in domestic demand. The trade surplus rose to US$ 33.8B, the highest level since early 2009, in November. Economists viewed that inflation won't be a big problem to Chinese authority in the coming months and would give leeway for keeping policies unchanged. The strong growth in exports also argued that the economy would regain momentum ahead.

Released from Japan, Q3 GDP was revised lower to 0.3% qoq, below expectation of 0.4% qoq, down from prior estimate of 0.5% qoq. GDP deflator was left unchanged at -0.3% yoy. Current account deficit came in at JPY -0.06T. Eco watcher sentiment improved to 53.5 in November. BoJ governor Kuroda said on the weekend that the exit from the current monetary easing "may be more difficult" then ending the program back in 2006 and "no exit from prolonged monetary easing is easy." He repeated that Japan is on track to achieving the 2% inflation target and will adjust policy as appropriate, based on both upside and downside risks to prices and the economy.

Elsewhere, New Zealand manufacturing activity rose 4.7% in Q3, providing support Kiwi as the strongest major currencies. Swiss will release unemployment rate and retail sales today. Eurozone will release Sentix investor confidence. Germany will release trade balance and industrial production. Canada will release housing starts. For the coming week, Fed officials Lacker, Bullard and Fisher will speak. In Europe, a 2-day Eurogroup/ECOFIN finance ministers' meeting begins today while ECB President Draghi will speak in Rome tomorrow. BOE Governor Carney would speak at the Economic Club of New York. In Asia Pacific, the RBNZ will release its final policy review on Thursday

Latest CFTC data showed sharp deterioration in the yen positions. Meanwhile, positions in the euro and Sterling turned on December 3 comparing to the prior week. The euro net positions turned long again to 9.3k, from prior week's -0.4k shorts. Sterling net longs rose to 18.4k, up from 0.4k. The yen net shorts jumped for the five straight week to new 2013 high of -133.4k, from -123.2k. Aussie net short rose to -44.3k. Canadian dollar net short rose to -41.6k, from -28.8k.