Who wins when global currencies tumble?

Good morning,

- BOJ's Kiuchi: Fed hike will not damage Japanese economy. Hopes Fed takes into account hike's effect on capital flows. Side effects of QQE not necessarily evident now, will be hard to handle side effects when they appear. Finally, Japan's economy has continued to recover moderately, prices regained stability in line with potential growth. - Bloomberg

- $AUDUSD dropped more than 0.5 percent after Australia's retail sales fell to a 14-month low.

- So far this session $NZD has been the best performing major vs $USD with +0.11% spot returns while $JPY has been the worst with -0.08%. Also, top performing majors versus the $CAD are $AUD, $NZD, $USD with +0.43%, +0.25%, +0.19% respectively.

- US Equities Close: DJIA 16351.45 (+1.83%); S&P500 1948.86 (+1.83%); NASDAQ 4749.98 (+2.46%).

- GBP/JPY made a significant break yesterday, closing below the key 185.00 handle by an impressive 230 pips. This level can be seen acting as resistance in February and more recently acted as support for the pair on July 8th and 9th. From here traders can begin watching for a retest of this area as new resistance. If the pair is unable to climb that high, a break below 181.60 could prove just as compelling for a short trade as yesterday’s breakout at 185.00. Weakness in GBPJPY is in line with the bearish sentiment that has taken hold of the yen crosses as concerns over China continue to mount

- So far this session $AUD has been the best performing major vs $USD with +0.08% spot returns while $EUR has been the worst with -0.09%.

- Currencies are crashing across the globe. The Brazilian real has lost 28% against the dollar just this year. The Turkish lira 20%, Colombian peso 23% and the Indonesian rupiah is down 11% versus the dollar in 2015. On the face of it, these are alarming moves. Yet, a lower currency value is something that some countries actually want. China, for instance, devalued the yuan by 2% last month, its largest move in two decades. However, in the short term a falling currency is also a reflection of weakness in underlying countries...''the dramatic global currency declines are raising the specter of the Asian financial crisis of 1997, which was triggered by the devaluation of the Thai baht, that fell 20% in one day. That crisis reverberated worldwide sending international stock markets to record lows and shook investors' confidence in the region for over a decade.''

- China's loss may be America's gain. A small survey released by FT Confidential this week found that China's economic slowdown and stock market gyrations are likely to spur more of its wealthy to put money overseas—particularly in the U.S. According to the study's findings, 61 percent of the rich Chinese surveyed in July plan to increase their overseas holdings over the next two years. Almost half said they plan to offshore more than 30 percent of their fortunes. While the survey, which polled only 77 people, should be taken with a grain of salt, its findings are in keeping with broader research.

- US Private sector employment increased by 190,000 jobs from July to August according to the August ADP National Employment Report®.

- Australia’s trade balance has deteriorated lately as the nation runs some pretty large trade deficits as a result of the big falls in commodity prices. That was one of the big drags on Q2 GDP released yesterday. But data released this morning from the Australian Bureau of Statistics show that things weren’t as bad as the market had forecast in August.

- For the past two decades, Brazil has been the indisputable king of Latin American stock markets. At one point a few years ago, its market had gotten so big that it was almost four times larger than that of its nearest rival, Mexico.But now, as the nation’s recession and political crisis deepen and its currency plunges, Brazil’s grip on the top spot is suddenly weakening. That gap over Mexico, once as much as $1.1 trillion, is down to just $133 billion. Since that time, the real has lost more than half its value while the Ibovespa has dropped 28 percent in local-currency terms. In that same span, Mexico’s peso weakened 32 percent and its benchmark stock index gained 20 percent.

- On the back of the recent sell-off in stock and bond markets, a number of measures of U.S. financial conditions and financial stress compiled by regional Federal Reserve banks are signaling the tightest readings in three years. Data released Wednesday by the Chicago Fed showed a rise in risk premiums coupled with a deterioration in leverage and credit conditions in the week through Aug. 28, all of which propelled the bank's National Financial Conditions Index to its highest level since November 2012. In other words, the boost the economy is getting from easy access to finance is beginning to fade.

- Major Today News: EU Retail Sales, US ISM, US Jobless Claims.

Have a nice Day !