CNH Firms, Aided By Stock Rescue Headlines & Tight Liquidity

CNH and KRW are the main pockets of strength so far in Tuesday trade. Hong Kong equity sentiment has rallied sharply on a potential China stock rescue. Mainland shares are only modestly higher at this stage. USD/CNH dipped back sub 7.1700 this afternoon. Elsewhere trends are more mixed. Still to come is Taiwan IP figures for Dec. Tomorrow, we have South Korea consumer confidence early, followed by the BNM decision late on in Malaysia.

• USD/CNH got to lows of 7.1664 a short while ago. We sit higher now, last near 7.1700, around 0.3% stronger in CNH terms. The only remaining EMA is the 100-day near 7.1630 to break on the downside. Onshore equities are marginally higher, but HK markets are up close to 3%. See this BBG link for more details around the potential stock rescue plan. To the extent this plan involves shifting SOE funds from offshore back into the domestic market it should be seen as a yuan positive all else equal. Other CNH supports have been evident in terms of tighter CNH liquidity and a widening USD/CNY fixing error term.
• 1 month USD/KRW is back to the 1331/32 region, with some positive spill over from lower USD/CNH levels. Onshore South Korean equities are marginally higher at this stage, the Kospi +0.40% firmer.
• Spot USD/SGD is lower, last near 1.3390/95. Dec CPI was slightly stronger than forecast. Headline printed at 3.7% y/y (3.5% forecast), while core was 3.3% y/y (3.0% forecast). Note we have the next MAS policy announcement on Monday.
• There are relatively steady trends elsewhere. USD/THB sits lower, last near 35.60, around 0.20% firmer in baht terms. The IMF expects Thai GDP to improve to 4.4% this year from 2.5% boosted by fiscal stimulus and robust consumption but then the economy is forecast to slow to 2% in 2025. It sees the risks to the downside.