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Asia Recap: AUD finds buyers at lows, low Chinese inflation

FXStreet (Bali) - Low activity in FX along Asian hours, with G10 currencies consolidating amid a slightly softer Yen, while the US Dollar held onto most of its overnight gains ahead of the European session.

AUD/USD found its lowest for the day at 0.8675, with talk of Central Bank/Aus 2017 issue-led demand noted as possible driver helping the AUD recover a bid tone towards 0.8710/15. NZD/USD followed yet again the AUD lead, testing bids near 0.78 before a bounce to 0.7840, with the next GlobalDairyTrade auction - early NZ hours of Thursday - now in focus.

USD/JPY traded up to 107.45, where sellers stepped in re-visiting 107.00, before further bids emerged to stabilize the rate circa 107.20. EUR/USD and GBP/USD kept a contained bearish tone, with minimal bounces ahead of ECB's Draghi speech, UK jobs data and US retail sales.

In Australia, the Westpac/Melbourne Institute consumer confidence index (seasonally adjusted) for October came at +0.9% MoM to 94.8 against a -4.6% prior at 94.0. Bill Evans, Chief Economist at Westpac, said: "Households, who reacted negatively to the Commonwealth Government’s May Budget, may have been encouraged by recent announcements that a number of budget initiatives have been set aside for the time being.”

Also in Australia, Fitch rating agency announced that risks in the Australian banking system have risen with high house prices.

In Japan, Masayoshi Amamiya, BOJ executive director of monetary affairs, said via main wires, that BoJ Gov kuroda keeps reiterating his view that as long as FX moves are in line with fundamentals, weak yen is a positive for exports and companies operating globally.

The came China's CPI numbers (YoY), recording a surprisingly low 1.6% in September, slightly below expectations of 1.7%, and lowest since November 2009. Since the data is below the 3.5% government target, and adding the Chinese PPI (YoY) of -1.8% vs -1.6% expected, there is increasing rumours around trading desks that Chinese policy markers may need to announce further selective easing. However, market sources suggest that deflation concerns are overplayed, with the industrial/manufacturing sector thought to simply passing on decreased input costs amid declines in commodity prices.

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