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Circling Fed Hawks Undermine Asia EM FX

ASIA FX

Fed repricing stoked by above-forecast U.S. CPI data & hawkish comments from St. Louis Fed chief Bullard provided a fillip for USD/Asia crosses, with resultant market impetus outweighing any idiosyncratic goings-on unfolding in Asia.

  • CNH: Spot USD/CNH traded with a bullish bias, but held this week's range. The PBOC fix was uneventful, providing no impetus to the yuan.
  • KRW: The South Korean won was among the worst performers in the region, owing to its sensitivity to moves in U.S. Tsy yields. FinMin Hong and BoK Gov Lee issued a statement in which they expressed concern over widening inflation pressures and pledged efforts to tackle inflation expectations and core inflation.
  • IDR: Demand for the greenback pushed spot USD/IDR higher, even as fresh data showed that Bank Indonesia's consumer confidence index returned to pre-pandemic levels last month. The results of Danareksa Research's survey have not yet been published.
  • MYR: Malaysia's economy returned to growth in the final quarter of 2021. The annual rate of GDP expansion printed at +3.6%, topping the median estimate of +3.3% and pushing full-year growth to +3.1% Y/Y. During a subsequent briefing, BNM Gov Shamsiah said that "premature withdrawal" of stimulus could affect economic recovery, adding that Bank Negara can "still afford to hold out a bit more unlike some of its EM peers." The ringgit showed a muted reaction to GDP data/BNM comments and slipped along other Asia EM currencies.
  • PHP: Buying pressure returned to spot USD/PHP, with the rate still dangerously close to key resistance from PHP51.500.
  • THB: The Thai baht weakened on the back of Fed-related flows, even as Thailand's own central bank flagged potential for an upgrade to the official CPI forecast for this year. The BoT noted that average inflation is expected to exceed the current forecast of +1.7% Y/Y this year and pledged to unveil an updated projection next month. Elsewhere, Thailand's Covid-19 panel gathered to discuss tightening curbs during upcoming holidays.
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