ForexLive Asia-Pacific FX news wrap: Verbal JPY intervention vs. CNY buying intervention

Japan’s
Finance Ministry’s Vice Finance Minister for International Affairs
Kanda spoke in the Tokyo morning. Kanda is the MoF official who will
instruct the BOJ to intervene, when he judges it necessary, and is
often referred to as Japan’s ‘top currency diplomat’. Kanda made some
blunt comments to support the yen, the strongest warning since
mid-August, with remarks along the lines of:

• “We
  won’t rule out any options if speculative moves persist.”
• “Needless
  to say, it’s important for currency moves to reflect fundamentals.”

As
an aside, as the Vice Finance Minister for International Affairs, I am
sure Kanda understands very well that a 500 or basis point
differential between US and Japanese yields is a very strong
fundamental in favour of a weaker yen. But, he is a politician, and
as we all know and are reminded of over and over again, facts don’t
mean very much a lot of the time.

USD/JPY
dipped to lows circa 147.40 but soon bounced back (facts are like
that, and verbal intervention is just words) to retest 147.80. USD/JPY is around 147.50 as I post.

A
few hours later we had actual intervention, this time Chinese
state-owned banks were in the market selling USD/CNY to support the
yuan. Buying the onshore yuan (CNY) impacted the offshore, CNH,
supporting it also. Prior to the intervention the People’s Bank of
China had set the reference rate for the day at the weakest for the
CNY since August the 22^nd.
Having said this, the reference rate was nevertheless set at 11+ big
figures from the modelled estimate. The PBOC has not yet given up on
efforts to support the yuan at its daily setting.

While
in China, Chinese state media outlet the Securities Times had an
article today saying that home buying restrictions in place in the
past are no longer appropriate and that policies curbing real estate
purchases and sales in non-first-tier cities shall be swiftly removed
based on the specific circumstance of the individual cities. Property
developer stocks rose.

On
the data front was Australian Q2 GDP, which came in better than
expected. For those picking apart the headlines though, productivity
is weak and the data showed a ‘per capita’ recession for
Australia. This is not a recession as the headlines would have it,
but
a further slowing of already weak consumer spending means the chance
of a recession ahead hovers around a 50-50 bet.

Apart
from yen and yuan major FX traded in subdued sorts of ranges.

Asian
equity markets:

• Japan’s
  Nikkei 225 +0.68%

• China’s
  Shanghai Composite -0.45%

• Hong
  Kong’s Hang Seng -0.86%

• South
  Korea’s KOSPI -0.65%

• Australia’s
  S&P/ASX 200 -0.68%

Offshore yuan update: