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Hawkish Fed Musings Undermine Asia FX, Yuan Shows Resilience

ASIA FX

Currencies from the Asia EM basket were broadly weaker, coming under pressure from rising U.S. Tsy yields as money markets are pricing sooner and bolder tightening steps from the Fed.

  • CNH: Spot USD/CNH traded with a mild bearish bias, with the PBOC providing another in-line fixing of the yuan reference rate. Separately, PBOC Dep Gov Liu pledged a more pro-active stance and said that the People's Bank will use more monetary policy policy tools to support growth. He mentioned that the PBOC will not allow one-way moves in the yuan, although this comment did not appear in the official transcript from.
  • KRW: Spot USD/KRW crept higher in the wake of the overnight surge in U.S. Tsy yields. South Korea's daily cases topped 5,000 for the first time in 20 days.
  • IDR: Spot USD/IDR jumped to its highest point in almost two weeks, with Tuesday's upswing in U.S. Tsy yields in the driving seat. Participants eyed Bank Indonesia monetary policy decision, due tomorrow.
  • MYR: Bank Negara Malaysia will also make a policy announcement on Thursday. Spot USD/MYR crept higher as onshore Malaysian markets re-opened after a holiday.
  • PHP: Spot USD/PHP showed above the PHP51.50 mark for the first time since Mar 18, 2020. Covid-19 headlines continued to dominate domestic news flow.
  • THB: The Thai baht retreated as the prospect of more aggressive Fed tightening jumped into the driving seat, stealing attention from Thailand's plan to reinstate the quarantine-free travel programme as soon as in Feb.

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