Currencies Sensitive To US Yields Weaken, Won Gains Persist

Most USD/Asia pairs are higher today, with firmer US yields and more elevated oil prices negative external headwinds. The won is the main exception, continuing to outperform. In terms of data tomorrow, South Korean industrial production prints, while Thailand trade figures are also due.

• USD/CNH has consolidated today, after the China currency rallied over the past two sessions as further covid restrictions were cut. We have stabilized close to 6.9700. The CNY fixing was close to neutral.
• 1 month USD/KRW has been offered for much of the session, last just under 1267, versus an open near 1272. Yesterday's lows were just under 1265. Onshore equities have slumped over 2%, following US led tech weakness, while offshore investors have been large sellers of local equities (-$403mn). Dollar selling, potentially related to onshore hedging off offshore asset positions, seems to be dominating for now.
• USD/IDR is higher, last around 15710, +0.30% firm for the session. This is fresh highs in the pair since the start of the month. The firmer US real yield backdrop is likely weighing on sentiment. November highs in the pair were around 15750.
• USD/THB sits slightly above recent lows, the pair last at 34.68. Through December dips sub 34.60 have been supported. Like other pairs in the region today, the USD is seeing some support, amid higher yields and a firmer oil price backdrop. Optimism around a pick-up in China outbound travel is a clear positive for the local currency. The government's latest estimates of 25million arrivals for 2023 is critical for a further improvement in the growth backdrop. The finance minister stated as much yesterday, with the government targeting 3.8% growth this year. The consensus sits slightly lower at 3.7%.
• USD/PHP is continuing to recover higher. The pair got close to 56.30 in the first part of the session but we are now back to 56.15 (+0.40% for the session). This is close to 2% above recent lows sub 55.10. We are back above the 20-day EMA (55.882), while the 100 day sits at 56.51 on the topside. External drivers in the form of higher US yields, (real 10yr yield back to 1.58%), and higher oil prices are likely headwinds.