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ASIA FX: CNH & KRW Steady After Sharp Wednesday Losses

ASIA FX
BulletEM BulletAPACEmerging Market News

In North East Asia FX trends have been mixed. USD/CNH sits back near 7.3100, off earlier highs of 7.3269. The CNY fixing was set much stronger than expected, with the error term widening back to late July levels. CNH T/N forward points also spiked higher, discouraging fresh longs in USD/CNH. Broader USD sentiment was also slightly softer, except for yen, which weakened post the on hold BoJ outcome.

• USD/CNH upside is likely to remain in focus, with late 2023 highs above 7.3400 the next potential upside target. This may have to wait until the USD/CNY fixing gets above 7.2000 though.
• Spot USD/KRW got to fresh highs of 1460.2, but sits lower now last under 1450, still 0.70% weaker in won terms. The National Pension Service will keep in place its strategic FX hedging cap of 10%, while the NPS and BoK swap facility will expand to $65bn (from $50bn) and will continue for another year. These moves are designed to take the impact of NPS's spot USD/KRW purchases out of the market (as it invests offshore). Still USD/KRW spot has consolidated its break above post martial law highs (near 1444.5). Upside levels now rest at 1500, last seen in 2009 post financial crisis.
• USD/TWD has broken higher, last in 32.65/70 region, levels last seen in early August. The CBC is likely to remain on hold later.

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In North East Asia FX trends have been mixed. USD/CNH sits back near 7.3100, off earlier highs of 7.3269. The CNY fixing was set much stronger than expected, with the error term widening back to late July levels. CNH T/N forward points also spiked higher, discouraging fresh longs in USD/CNH. Broader USD sentiment was also slightly softer, except for yen, which weakened post the on hold BoJ outcome.

• USD/CNH upside is likely to remain in focus, with late 2023 highs above 7.3400 the next potential upside target. This may have to wait until the USD/CNY fixing gets above 7.2000 though.
• Spot USD/KRW got to fresh highs of 1460.2, but sits lower now last under 1450, still 0.70% weaker in won terms. The National Pension Service will keep in place its strategic FX hedging cap of 10%, while the NPS and BoK swap facility will expand to $65bn (from $50bn) and will continue for another year. These moves are designed to take the impact of NPS's spot USD/KRW purchases out of the market (as it invests offshore). Still USD/KRW spot has consolidated its break above post martial law highs (near 1444.5). Upside levels now rest at 1500, last seen in 2009 post financial crisis.
• USD/TWD has broken higher, last in 32.65/70 region, levels last seen in early August. The CBC is likely to remain on hold later.