Currencies firm up on rate hike chances

Asia market update: Currencies firm up on rate hike chances; NZ$, A$, JPY; Even GBP firmer ahead of UK budget; KR BOK rate decision tomorrow.

General trend and developments

- Kiwi spiked on potential end-of-cycle easing with 2-year yields +9bps, Aussie dollar was firmer +0.5% on hotter Oct CPI as UBS now sees RBA hiking a year from now; Yen also firmer on increased rate hike chances for all three currencies.

- GBP also firmer ahead of the much-awaited UK Autumn budget from Chancellor Reeves tonight.

- Kiwi dollar +1.3% after the RBNZ cut by the expected 25bps to 2.25% but indicated that risks are now balanced and leading indicators suggest an economic recovery is happening. Suggests the 350bps easing cycle may be over, although RBNZ statement did say that there could be one more cut in 2026. (**Note that Riksbank’s First Dep Gov Ana Breman will take over as RBNZ Gov on Dec 1st).

- The Yen continued to firm on reports that the BOJ is preparing for the long-awaited extra rate hike to 0.75% as early as the December meeting. BOJ Dec OIS rate hike chances rose to 51.5% vs 42.5% end of last week and Jan hike chances rose to 85.5% vs 80% end of last week. JP Yield curve flattened as front end rose nearly 2bps while 40-year yield rose into today’s bi-monthly auction, but fell back to be down 1bps to 3.680% after a reasonably bid 40-year JGB auction today.

- China Offshore Yuan also hitting levels not seen since early Oct last year as China PBOC set the Yuan reference rate stronger into the 7.07 handle for first time since Oct 2024.

- Nikkei and Kospi led Asia once more today, both up >2%.

- Overnight Japan PM Takaichi put some more weight into her economic growth goals by committing her govt to spend ¥1T on SME wage hike support and asking firms for base pay gains above inflation. Comes as JP inflation continues to gain ground, with seafood company Maruha Nichiro said it would raise frozen food prices by up to 22%.

- Trump Admin’s ending of the $800 de minimis import tax exemption in the US continues to catch on elsewhere (e.g. UK, EU, Australia, NZ, Singapore), with Japan now also said to be considering ending its own small import tax exemption.

- As pressure builds on OpenAI with its share of AI search falling company says it sees 230M paying users by 2030. Came as Softbank pulled back some of its extensive recent losses amid Google chip competition against Nvida, and by extension OpenAI.

- Chinese officials noting the treatment and refining charges of copper currently takes place at a loss, which is ‘unsustainable’. Aurubis COO noted 'does not want a war with copper miners'.

- Further concern about China’s property market as formerly ‘safe’ China Vanke’s 3.7% bond suspended from trading following 20% price drop.

- Against the backdrop over the diplomatic spat from China against Japan for backing the defense of Taiwan, Pres Lai of Taiwan confirmed a $40B supplementary defense budget, which will fund new arms package from US and enhance Taiwan's asymmetrical capabilities.

- Spot gold +1% during Asia trading.

- US equity FUTs +0.3% to +0.4% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Wed Nov 26th (Wed eve UK Autumn Budget, DE Dec Consumer Confidence) (Wed night delayed US Sept Durable Goods).

- Thu Nov 27th NZ Nov Biz Confidence, KR BOK Rate Decision, JP MOF meetings with JGB investors & dealers, JP BOJ’s Noguchi.

- Fri Nov 28th JP Oct Retail Sales & Industrial Production, (Fri eve: various EU Nov prelim CPI).

Holidays in Asia this week

- Mon Nov 24th Japan.

- Thu Nov 27th US Thanksgiving (US time).

- Fri Nov 28th US Thanksgiving half-day (early close, US time).

Headlines/Economic data

Australia/New Zealand

- ASX 200 opens +0.9% at 8,617.

- Australia OCT CPI Y/Y: 3.8% V 3.6%E.

- Australia Q3 Construction Work Done: -0.7% v 0.3%e.

- Australia sells A$700M v A$700M indicated in 2.75% Nov 2029 Bonds: Avg Yield: 3.8391% v 3.4686% prior; bid-to-cover: 3.67x v 3.75x prior.

- RBA’s Smith (Head of international): Little evidence of reallocation away from US dollar assets - Speech at Australian Securitisation Conference, Sydney.

- New Zealand Central Bank (RBNZ) cuts official cash rate (oOCR) by 25bps to 2.25%; as expected.

- RBNZ Acting Gov Hawkesby: Risks to inflation are balanced - post-rate decision press conference.

China/Hong Kong

- Hang Seng opens +0.6% at 26,046; Shanghai Composite opens -0.1% at 3,867.

- China gold 'speculative boom' leads to regulatory warnings - Chinese press.

- China Vanke’s 3.7% bond suspended from trading following 20% price drop.

- China Nonferrous Metals Industry Assoc. Vice Chair Chen Xuesen: Current state of negative TC/RCs means production takes place at a loss which is "unsustainable" - comments at event.

- Follow up: China buys 'at least' 10 cargoes of US soybeans for Jan shipment - press, citing traders.

- China PBOC official 'urges' the development of financial legal system - Press.

- Alibaba: Reports Q2 $0.61 v $0.66e, Rev $34.8B v $34.4Be; Notes near-term profitability is expected to fluctuateas it is in investment phase to build long-term strategic value in AI technologies and infrastructure and a consumption platform integrating daily life services and e-commerce [overnight update].

- NIO: Reports Q3 (CNY) -1.14 v -1.56e, Rev 21.8B v 22.3Be; Guides Q4 below est [overnight update].

- Hong Kong Oct Trade Balance (HKD): -39.9B v -34.2Be [overnight update].

- China PBOC sets Yuan reference rate: 7.0796 v 7.0826 prior.

- China PBOC Open Market Operation (OMO): Injects CNY213B in 7-day Reverse Repos; Net drains CNY97B v drains CNY105B prior.

Japan

- Nikkei 225 opens +0.7% at 49,012.

- Japan Oct PPI Services Y/Y: 2.7% v 2.7%e.

- Japan Sept Final Leading Index CI: 108.6 v 108.0 prelim.

- Japan 2025 tax revenues seen >¥80.0T - US financial press.

- Japan said to be planning test of 600-km quantum encryption network linking major cities – Nikkei.

- Japan sells ¥400B VS. ¥400B indicated in 40-year bonds; yield at lowest acceptable price: 3.5550% V 3.300% prior; bid-to-cover: 2.59X V 2.13X (above 12-month avge 2.48x).

- Japan 40-year JGB yields falls 1bps to 3.680% after reasonably bid 40-year JGB auction today.

- Japan Chief Cabinet Sec Kihara: Italy PM Meloni to visit Japan.

- Japan Govt reportedly considers ending small import tax exemption - Asia press.

- Tokyo's hotel tax said to planned at 3% with no cap - Nkkei.

- (CN) China MOFCOM: Asks airlines to extend Japan flight cuts until March and extends probe into imported beef to Jan 26th, 2026 - financial press [overnight update].

- Japan PM Takaichi: Govt to spend ¥1T on SME wage hike support; Asking firms for base pay gains above inflation [overnight update].

- Japan Foreign Min Motegi: Will keep explaining Japan's stance on China [overnight update].

Korea

- Kospi opens +0.9% at 3,891.

- South Korea Oct Retail Sales Y/Y: 6.7% v 7.7% prior.

- South Korea Nov Business Manufacturing Survey: 92.7 v 92.4 prior.

- South Korea Industry Min Kim: Urges Yeosu petrochem complex to draw up reform plans; Will not extend petrochemical reforms beyond December.

- South Korea Finance Ministry: South Korea has introduced a US investment bill proposal which has met requirements for auto tariffs (as expected).

Other Asia

- Singapore Oct Industrial Production M/M: +11.5% v -8.3%e; Y/Y: 29.1% v 6.7%e.

- Taiwan Pres Lai: China threats to Indo-Pacific are intensifying; Confirms NT$1.25T supplementary defense budget (~$40B) - financial press.

- (SL) Sri Lanka Central Bank (CBSL) leaves Overnight Policy Rate unchanged at 7.75%; as expected).

- Taiwan Pres Lai: Will introduce a historic $40B supplementary defense budget, which will fund new arms package from US and enhance Taiwan's asymmetrical capabilities; Taiwan's dedication to peace and stability is unwavering [overnight update].

- Taiwan tariff talks with US said to be 'largely completed' – press [overnight update].

- Taiwan Oct Industrial Production Y/Y: 14.5% v 16.1%e [overnight update].

- Taiwan Premier Cho-Jung-tai says 'no information' on cooperation with South Korea on US chip tariffs - financial press [overnight update].

- Thailand extends EV registration period and plans more exports to ease oversupply – press [overnight update].

North America

- (US) National Economic Council's Hassett: Would say 'Yes' if asked to be Federal Reserve Chair [responds to press report]- Fox News.

- OpenAI reportedly expects 220M paying users for ChatGPT by 2030 - The Information.

- (US) Weekly API Crude Oil Inventories: -1.9M v +4.4M prior.

- (US) US Pres Trump: Reiterates that his administration is looking at healthcare alternatives for the ACA subsidies; Notes that some kind of extension of subsidies may be necessary, but doesn't want to extend them.

- US White House: Trump is not considering 2 year extension of ACA subsidies; Plans to make recommendations for healthcare policy improvement in the near future.

- (US) Nov consumer confidence: 88.7 V 93.4E.

- (US) SEPT PPI final demand M/M: 0.3% V 0.3%E; Y/Y: 2.7% V 2.6%E; PPI (ex-food/energy) M/M: 0.1% v 0.2%e; Y/Y: 2.6% v 2.7%e.

- (US) Sept advance Retail Sales M/M: 0.2% V 0.4%E; Retail Sales (EX-AUTO) M/M: 0.3% V 0.3%E.

- (US) ADP Preliminary Employment Change for 4-weeks ending Nov 8th: -13.5K v -2.5K prior.

- (US) OCT PENDING HOME SALES M/M: 1.9% V 0.2%E; Y/Y: -0.4% V -1.2%e.

- (US) NOV RICHMOND FED MANUFACTURING INDEX: -15 V -4E.

- (US) Sept S&P cotality house price index (20-CITY) M/M: 0.13% V 0.10%E; Y/Y: 1.36% V 1.40%E.

- (US) Sept FHFA house price index M/M: 0.0% V 0.2%E; Q/Q: 0.2% V 0.0% prior.

- (US) Nevada reports Oct casino gaming Rev $1.35B, +5.0% y/y, Las Vegas strip Rev $748.9M, +8.2% y/y.

- (US) Oct Federal budget balance: -$284.4B V -$235.1BE.

- (US) Treasury $70b 5-year note auction draws 3.562% v 3.625% prior, BTC 2.41 v 2.38 prior and 2.38 over the last 12 auctions.

- (US) Reportedly Kevin Hassett seen as frontrunner for Fed Chair nomination - pres.

- (US) Treasury Sec Bessent: Fed's ample regime might be fraying; US position on Taiwan is unchanged; Agreed to work together on peace in Ukraine; Chinese are right on schedule for soybean purchases.

- US official: Ukraine agrees to terms of peace deal but there are minor details to be sorted out - ABC News cites US Army Sec Driscoll.

Europe

- (UR) Ukraine official: Govt supports essence of peace deal framework; Pres Zelenskiy and US Pres Trump to discuss most sensitive issues within framework – press.

- (UR) Reportedly Ukrainian Pres Zelenskiy wants to meet Trump as soon as possible, potentially on Thanksgiving, to finalize a deal on ending the war - press.

- (UR) US Pres Trump: Believes we're getting close to Ukraine deal.

- (UR) US Pres Trump: Envoy Witkoff to meet Russia Pres Putin in Moscow; Army Sec Driscoll to meet with Ukraine - Truth Social post.

- (FR) France Nov consumer confidence: 89 V 90E.

- (DE) Germany Q3 final GDP Q/Q: 0.0% V 0.0%E; Y/Y:0.3 % V 0.3%E.

- (FR) France Socialists Chief Faure (opposition): Sees budget deal as possible.

Levels as of 01:20 ET

- Nikkei 225 +2.0%, ASX 200 0.8%; Hang Seng +0.5%; Shanghai Composite +0.2%; Kospi +2.5%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.4%; DAX +0.7%; FTSE100 +0.1%.

- EUR 1.1563-1.115.92; JPY 156.65-156.37; AUD 0.6465-0.6508; NZD 0.5616--5697.

- Gold +0.9% at $4,202/oz; BTC -0.6% at $87,689; Crude Oil +0.2% at $58.20bbl; Copper +0.5% at $5.1358/lb.