Asia EM FX Under Pressure As Shenzhen Enters Lockdown, PBOC Shows Weak Bias In Yuan Fixing

China's worsening outbreak of Covid-19 dampened sentiment in Asia, with participants assessing the broader risk backdrop.

• CNH: Spot USD/CNH operated in positive territory as China's outbreak of Covid-19 continued to spread (resulting in a snap lockdown in Shenzhen), while the PBOC displayed weak bias in their daily yuan fixing. China's central bank set yuan reference rate at CNH6.3506, 150 pips above sell-side estimate.
• KRW: The won led losses in the Asia EM basket, with spot USD/KRW lodging fresh cycle highs. Deteriorating Covid-19 situation in China and South Korea (where daily cases topped 300k again) undermined sentiment, while reports of North Korea preparing another ICBM test provided another source of concern.
• IDR: Spot USD/IDR crept higher, following regional trend. A retreat in palm oil prices may have added some pressure to the rupiah.
• MYR: The ringgit may have also suffered from weaker palm oil prices. Spot USD/MYR tested resistance from Feb 24 high of MYR4.2077, its highest point in recent weeks.
• PHP: Spot USD/PHP rallied to fresh multi-year highs. BSP Gov Diokno advised against returning to the system, whereby the government could set oil price, as it would "create big hole in the national treasury."
• THB: The baht showed at the local Covid-19 task force may consider easing restrictions further on Friday. The implications of China's Omicron outbreak and Western sanctions against Russia for the global tourism sector continued to undermine the Thai currency.