Asia has started the week with a defensive....>

FOREX: Asia has started the week with a defensive feel as markets absorbed

weekend news flow. The ever increasing U.S.-China tensions and a brief exchange

of fire across the Korean DMZ have captured attention, inspiring a flight to

safety. JPY leads gains in the G10 basket, with USD and CHF also well bid.

Liquidity is thinned as China and Japan observe public holidays.

- Continued sabre rattling between Washington and Beijing has helped USD/CNH

higher, though the rate has already pared gains. Elsewhere in regional EM FX,

onshore KRW reopened after the long weekend and trades on a softer footing,

playing catch-up to the latest risk-off developments. South Korean Y/Y CPI

inflation slowed more than expected to +0.1% from +1.0% in April.

- Risk aversion has amplified the impact of softening crude prices on oil-tied

FX, with NOK underperforming all of its G10 peers as we type. USD/MXN briefly

showed above Friday's high and remains elevated.

- A flurry of M'fing PMI readings from across the world, Australia's building

approvals, as well as U.S. factory orders and final durable goods take focus

today. The ECB will publish its Survey of Professional Forecasters.