China Draws Attention, Redback Loses Ground

The yuan retreated as participants assessed daily PBOC operations, the central bank's yuan fixing and its decision to leave the LPR unchanged, in line with expectations. The won led gains in Asia EM space as risk-on impetus from overnight provided support.

• CNH: The PBOC fix drew attention today, in the wake of Tuesday's sharp appreciation in the yuan. China's central bank set the central USD/CNY mid-point 27 pips above sell-side estimate, signalling a sense of discomfort with a stronger redback. In addition, the PBOC boosted their daily liquidity injection to net CNY90bn, citing tax season requirements and government bond issuance. On a different front, China's new home prices registered the first monthly contraction since 2015, fuelling existing concerns about China's real-estate sector.
• KRW: The won rallied after onshore markets reopened, playing catch up with overnight risk-on flows and yuan surge. FinMin Hong said that the government discussed temporarily cutting fuel tax and could make an announcement on the matter next week, as oil prices may remain elevated for some time.
• MYR: Firmer crude likely lent some support to the ringgit, as the currency crept higher. Improving domestic Covid-19 situation may have further bolstered the MYR. There may have been an element of catch up in today's price action, as local markets were shut yesterday.
• THB: In Thailand, the Bangkok Post reported that PM Prayuth asked relevant agencies to keep diesel price at THB30/litre for as long as possible, but pushed back against haulage operators' demand to set the cap at THB25/litre. The baht struggled for any topside impetus, even as Thailand's daily Covid-19 cases fell to a fresh three-month low.
• PHP: The peso went offered amid limited local headline flow. Spot USD/PHP topped out at PHP50.925, just shy of the psychological barrier/Sep 27 high at PHP51.000/51.036.
• SGD: USD/SGD extended losses but struggled to test yesterday's low. The city state logged its record daily count of Covid-19 infections on Tuesday, but regional participants were unfazed.
• IDR: Indonesian markets were closed in observance of a local holiday.