The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0306 GMT - The Indonesian rupiah could face headwinds from narrowing interest-rate differentials with the U.S. as Bank Indonesia remains reluctant to use rate increases to support the currency, BofA analyst Abhay Gupta says in a note. Focus has instead shifted to reducing foreign-exchange hedging costs to attract foreign inflows. However, in the event of further Fed rate increases, narrowing rate differentials alongside ample liquidity could create a persistent headwind for the rupiah and fuel domestic capital outflows. A decline in net foreign-exchange reserves also points to a limited buffer, suggesting that the Indonesian central bank will need to use additional inflows more selectively to defend the currency, he adds. The dollar is 0.1% lower at 17997.04 rupiah. (yingxian.wong@wsj.com)
0247 GMT - The Bank of Thailand is likely to maintain its policy rate at 1.00% for the rest of this year to support the economy, Capital Economics economists say in a note. 2Q GDP contracted 0.2% on quarter on a seasonally adjusted basis. The economy is expected to remain sluggish in the near term, largely due to sharply higher energy prices, they say. Headline inflation accelerated to 2.53% on year in August from 1.95% in July. (amanda.lee@wsj.com)
0244 GMT - The Singapore dollar weakens slightly against its U.S. counterpart in the Asian session amid U.S.-Iran tensions. The persistent tensions have "kept oil prices elevated and reinforced concerns about inflation," two strategists at OCBC Group Research say in a research report. "Recent market moves suggest that higher yields are acting more as a brake on risk appetite than a trigger for broader market stress," the strategists say. "Rising oil prices, elevated Treasury yields and resilient U.S. economic data continue to support the USD," the strategists add. The U.S. dollar is 0.1% higher at 1.2777 Singapore dollars, LSEG data show. (ronnie.harui@wsj.com)
0238 GMT - Most economies in Asia are on track to post solid economic growth this year, Capital Economics economists say in a report. As most countries in the region are big net energy importers, the Middle East crisis and elevated energy prices could hurt growth, they say. However, strong demand for artificial intelligence-related products is boosting exports and helping offset the impact of high energy prices, they say. Subsidies and price controls in some Asian economies are also helping keep inflation under control, they say. (amanda.lee@wsj.com)
0216 GMT - The Monetary Authority of Singapore could steepen its policy band's slope in October, Citi economist Wei Zheng Kit says in a report. This is largely due to an unexpected further widening of the positive output gap--a metric that shows whether the economy is operating near full capacity --in 3Q and a stabilizing labor market, he adds. However, he notes that the decision remains a close call given factors including prices potentially rising more slowly in 4Q. Citi sees a 60% probability of a very slight 25bp steepening in October, with a 40% probability of a hold. Should MAS remain on hold next month, Citi expects a very slight steepening in January. (amanda.lee@wsj.com)
0212 GMT - Malaysia's fiscal support could be doing the heavy lifting in sustaining consumer spending despite weaker sentiment, with private consumption growing 4.8% on year in 2Q, Hong Leong IB analyst Jonathan Ooi says in a note. The coming budget due Oct. 9 could extend support, alongside a possible minimum-wage increase, he reckons. Government utilities subsidies and potential cash aid should help consumer sentiment recover, while tourism provides another growth driver, he says. The return of F1 to Sepang during China's Golden Week could be a strong catalyst, he adds. Costs remain a key watch point, with fuel, freight, CPO and coffee prices rising amid the Iran war, Ooi says. Hong Leong maintains an overweight rating on Malaysia's consumer sector. AEON Co. (M) and Focus Point are its top picks. (yingxian.wong@wsj.com)
0139 GMT - Asian currencies continue to face some challenges, MUFG Bank's Michael Wan says in a research report. Higher oil prices have reinforced worries over inflation and tighter monetary policy, the senior currency analyst says. Also, Brent crude price has stayed above $100 a barrel, "presenting Asia's oil importers with a negative terms-of-trade shock and higher-for-longer global yields," Wan says. "We expect SGD and CNY to remain more defensive, while IDR and THB look more exposed if oil prices, U.S. yields and dollar strength remain elevated." Wan adds. The U.S. dollar is steady at 1.2779 Singapore dollars, little changed at 6.7120 onshore yuan, and flat at 33.60 baht, FactSet data show. (ronnie.harui@wsj.com)
0131 GMT - Australia's house price retreat since May has been sharp, but analysts still refer to it as "orderly." So far, very few mortgage borrowers have seen the value of their homes fall below the size of loan needed to purchase it. A solid job market and an undersupply of homes is also lending the housing market some support. Still, if the Reserve Bank of Australia delivers two further interest rates increases before the end of the year, taking the official cash rate to its highest level in nearly 20 years, the correction could become distressed. There's a lot riding on the RBA's policy meeting Tuesday, where a fourth interest rate rise for the year is expected to be announced at 0430 GMT. (james.glynn@wsj.com; X @JamesGlynnWSJ)
0117 GMT - The sharp repricing of Malaysian Government Securities might add another headwind to banks' 2H noninterest income, but the earnings and book-value impact could remain manageable, Hong Leong IB analyst Raymond Ng says in a note. The 10-year MGS yield has risen to 3.94% from 3.60% at end-June, with further volatility possible if U.S. rates remain elevated, he notes. Higher yields should eventually support investment income as banks reinvest maturing securities, but this benefit will take time to materialize, he says. AMMB and Bank Islam Malaysia are relatively more exposed to potential earnings pressure, while Bank Islam, AMMB and Public Bank have higher sensitivity to book value, he adds. Hong Leong keeps a neutral rating on Malaysia's banking sector, pegging Public Bank as 4Q's top pick. (yingxian.wong@wsj.com)
0028 GMT - JGBs edge lower in the morning Tokyo session, tracking overnight price declines in U.S. Treasurys. Japan's bond market may also be weighed down by rising oil prices that could spur a faster pace of BOJ rate increases. However, given the small size of the Japanese Finance Ministry's auction today of 40-year JGBs and the current 40-year yield level, the sale may produce a "neutral to slightly strong" outcome, SMBC Nikko Securities' senior Japan rates strategist Miki Den says in a research report. The ministry is scheduled to auction about 300 billion yen of 40-year JGBs. The 10-year JGB yield is 0.5bps higher at 3.090%. (ronnie.harui@wsj.com)
0025 GMT - Japanese stocks are lower in early trade as uncertainty about the Iran conflict and higher borrowing costs continues. Auto, steel and financial stocks are leading declines. Toyota Motor is down 2.6%, Nippon Steel is 3.3% lower and Nomura Holdings is down 2.8%. The dollar is at 157.45 yen, compared with Y157.63 as of Monday's Tokyo stock market close. Investors are closely watching developments in the Middle East, oil prices and bond yields. The Nikkei Stock Average is down 0.8% at 65373.77. (kosaku.narioka@wsj.com; @kosakunarioka)
2346 GMT - Asian currencies consolidate against dollar but may be weighed by rising oil prices that could prompt further Fed rate increases that bolster the appeal of U.S. fixed-income assets. "The U.S. and Iran remained far apart on a deal, with Iranian officials reportedly pessimistic about reaching an agreement before U.S. midterm elections in November," CBA's Carol Kong says in a research report. "The prolonged closure of the Strait of Hormuz threatens to sustain elevated energy prices, adding to inflation pressures and reinforcing the case for further Fed tightening," the economist and currency strategist adds. The dollar is little changed at 157.35 yen and is 0.1% lower at 1,358.27 won, LSEG data show.
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