Daily Observations:

Indices in Japan, Australia, South Korea and Singapore declined, while the dollar pared its week’s advance, ahead of Yellen’s much-anticipated speech on US interest-rate outlook tonight. Gold tested 1-month lows while crude oil held above $47/bbl.


  • Durable goods orders in July gained 4.4% from a decline of 4.2% the previous month; economists were expecting a gain of 3.4%. The better-than-expected increment was led by strong demand for transportation equipment driven by the volatile civilian aircraft and parts category.
  • Initial jobless claims last week unexpectedly fell to 261,000 from 262,000; analysts were predicting a rise to 265,000.
  • Markit US Services PMI for August dropped to 50.9, from 51.4 the previous month, missing estimates of a rise to 51.8.
  • Two Fed officials, Esther George and Robert Kaplan, argued the case for another rate hike in separate interviews on the eve of Yellen’s speech in Jackson Hole on Friday.
    • George repeated her case in a Bloomberg interview that higher rates were warranted with the US nearing full employment and inflation rising towards the Fed’s target.
    • Kaplan told CNBC that “the case is strengthening” for another rate increase, although there is no rush to do so.
  • Yellen will speak at 10pm SGT; the formal topic of her remarks – “The Federal Reserve’s Monetary Policy Toolkit”, implies a technical focus on the challenges facing the central bank in an era of sluggish growth and slow inflation.
  • According to Bloomberg pricing data, odds of a rate hike by the Fed’s next meeting on Sep 20-21 have risen to 32%, from 18% at the start of the month.
  • Treasury yields rose; 2yr note yields rose 3bp to 0.79% while the benchmark 10yr yield gained 1bp to 1.58%.
  • The dollar continues to pare some of its gains over the past week, with the Bloomberg Spot Dollar Index declining 0.2% earlier today.
  • The S&P 500 Index edged 0.1% lower, declining for second day as investors either took profits or opted to stay on the side-lines ahead of Yellen’s much-anticipated speech.


  • Headline CPI in July maintained its negative trajectory, falling 0.4% from a year earlier. Stripped of fresh food, Japan’s core CPI gauge dropped 0.5% year-on-year, more than the 0.4% drop predicted.
  • After more than 3 years of unprecedented monetary stimulus, the BOJ is no closer to its price target of 2% and investors are asking whether the central bank is running up against the limits of its effectiveness.
  • The BOJ next meets on Sep 20-21.


  • Authorities have allowed China Securities Co. to sell credit-risk mitigation warrants, a Chinese version of credit-default swaps, which were introduced in 2010 but have not been sold since 2011. The revival of said default hedging tool reflects the rising concerns over credit risk after bond delinquencies surged this year.

Precious Metals:

  • Spot gold extended declines by another 0.4% to $1,318.18/Oz last night, before rebounding sharply to pare its losses and remain largely unchanged. The key support of $1,310 remains.
  • Silver for immediate delivery rebounded 0.8% following the previous day’s slump. Its key support lies at the $18.50/Oz level.


  • Crude oil futures expiring in September rose 1.2% to settle at 47.33/bbl, after a report that Iran’s oi minister Zanganeh will participate in an informal gathering of OPEC members next month in Algiers, boosting hopes of an output freeze.



  • Spot 1.3522
  • USDSGD was largely unchanged. Unsurprising, given the fact that most investors and traders are staying out of the market given tonight’s risk event at Jackson Hole.
  • A dovish-than-expected speech could potentially push the currency pair back towards the 1.3400 level, while the reverse could drive USDSGD back above 1.3600.



  • Spot 0.7631
  • The Aussie posted slight gains, and was 0.2% higher at 0.7633 to the dollar.
  • AUDSUD continues to remain supported by the 0.7600 handle.



  • Spot 1.2910
  • USDCAD continues to be capped below the 1.3000 level. The currency pair has been consolidating around 1.2900 this week.



  • Spot 6.6808
  • USDCNH rose 0.2% to 6.6829 earlier today; Mizuho Bank said USDCNH buying this morning was likely due to flows from some companies buying HKDCNH, as well as the market building a short CNH position to target yuan depreciation after the G-20 meeting on Sep 4-5.



  • Spot 100.47
  • USDJPY edged lower following the release of last month’s inflation numbers this morning, as most analysts remain sceptical of any impactful easing from the BOJ in their next meeting.



  • Spot 1.3207
  • GBPUSD remained steady around the 1.3200 handle this morning.
  • From a technical perspective, a head-and-shoulders pattern has formed over the past 2 months since Brexit, with the currency pair being consistently capped below the neckline over the period. A break above it, which coincides with the recent high of 1.3273, could signal a possible reversal.
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UEN: 201419754M

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