China COVID Matters Remain Front & Centre

Shanghai breathed a sigh of relief after managing to avoid community transmission of COVID-19 for three days in a row, which opens the door to continued relaxation of strict curbs. Market sentiment improved further as Hong Kong confirmed its plans to press ahead with reopening plans, while Hangzhou eased restrictions on some existing home purchases.

• CNH: Offshore yuan went bid on the back of headline flow recapitulated above. The PBOC provided a further tailwind to the redback by reintroducing appreciation bias to its USD/CNY fixing and announcing impending issuance of CNH10bn of 3-Month Bills & CNH15bn 1-Year Bills. Spot USD/CNH probed the water below CNH6.7840/36, which limited losses over the last two days.
• KRW: The won led gains in the Asia EM basket as greenback weakness carried over into the Asia-Pac session, while the risk switch was flicked to on.
• IDR: The rupiah tumbled as onshore markets re-opened after a holiday. Spot USD/IDR soared to its highest point since Nov 2020. Indonesia's exports grew faster than expected in April.
• MYR: The ringgit held the prior trading day's range. Malaysian markets were also shut on Monday.
• THB: Thailand returned from a long weekend with Q1 GDP hitting the wires. The local economy grew 2.2% Y/Y in the first quarter, beating BBG median estimate (+1.7%), but the NESDC trimmed its 2022 GDP growth estimate to +2.5%-3.5% from +3.5%-4.5%. The baht stayed above neutral levels.
• INR: The rupee printed another all-time low as elevated crude oil prices continued to generate headwinds.