MNI China Daily Summary: Friday, October 11

MNI: GERMANY SEP FINAL HICP -0.1% M/M; +1.8% Y/Y

MNI: PBOC Net Drains CNY183.8 Bln via OMO Friday

MNI: PBOC Sets Yuan Parity Lower At 7.0731 Fri; +3.03% Y/Y

CHINA PBOC CONDUCTS CNY94.2 BLN VIA 7-DAY REVERSE REPOS FRI

CHINA SETS YUAN CENTRAL PARITY AT 7.0731 FRI VS 7.0742

MNI: GERMAN SEP CPI +1.6 % Y/Y

MNI: UK AUG TRADE BALANCE GBP -0.95BN

MNI: UK AUG CONSTRUCTION OUTPUT +0.4% MM, +1% 3M3M, +0.3% YY

CANADA: Politics Week: Parliament Opens With Early Election Threats

AUSTRALIA: Albanese Lines Up Budget for May Election

AUSTRALIA: Albanese Lines Up Budget for May Election

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JAPAN: A Weaker Yen May Be Back In Focus For The BOJ

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The weaker yen is once again in focus. Yen has lost around 6.5% against the USD since mid September (the USD/JPY trough point). Late yesterday ex BoJ executive official Momma stated that a push in USD//JPY above 150.00 would bring forward the next BoJ rate hike. He added that the July hike was 80-90% driven by the weaker yen trend (per BBG). 

  • USD/JPY y/y shifts have a reasonable correlation with Japan import price momentum. The first chart below presents the two series. Note we extrapolate y/y shifts in USD/JPY to the end of this year by assuming that USD/JPY rises just above 150 by the end of this month and holds there. Such a backdrop would imply y/y import prices would start turning positive again by year end (currently at -2.6%).
  • The historical correlation back to 2014 between the two series is 56%. If we use the Japan TWI it is slightly higher at 59% (obviously using inverse changes in the TWI index). 

Fig 1: USD/JPY And Japan Import Prices Y/Y

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The weaker yen is once again in focus. Yen has lost around 6.5% against the USD since mid September (the USD/JPY trough point). Late yesterday ex BoJ executive official Momma stated that a push in USD//JPY above 150.00 would bring forward the next BoJ rate hike. He added that the July hike was 80-90% driven by the weaker yen trend (per BBG). 

  • USD/JPY y/y shifts have a reasonable correlation with Japan import price momentum. The first chart below presents the two series. Note we extrapolate y/y shifts in USD/JPY to the end of this year by assuming that USD/JPY rises just above 150 by the end of this month and holds there. Such a backdrop would imply y/y import prices would start turning positive again by year end (currently at -2.6%).
  • The historical correlation back to 2014 between the two series is 56%. If we use the Japan TWI it is slightly higher at 59% (obviously using inverse changes in the TWI index). 

Fig 1: USD/JPY And Japan Import Prices Y/Y

Keep reading...Show less