IDR & CNH Lag Broader USD Weakness, THB Shrugs Off BoT Independence Uncertainty

USD/Asia pairs are mixed. We saw a softer USD trend earlier in the session amid positive equities, but most pairs sit up from session lows. CNH and IDR have lost ground against the USD as well, underperforming the rest of the region. USD/THB spiked higher on headlines around a loss of BoT independence, but the move drew selling interest. Tomorrow, we have the Philippines unemployment rate and Taiwan CPI figures on tap.

• USD/CNH has firmed a touch, back to 7.2540 this afternoon. A weaker yen, coupled with onshore equity market weakness has weighed, offsetting a stronger than expected Caixin services PMI print, which rose to 10 month highs.
• 1 month USD/KRW got sub 1366 in earlier dealings, testing 20-day EMA support, but we sit slightly higher now (last around 1367). Onshore equities are higher, up over 1%, but broader risk sentiment is off post Caixin services PMI highs. Q1 GDP revisions were down a touch in y/y terms.
• USD/THB hit highs of 36.69 post headlines from BBG that the Thailand government would look to exert more influence on the central bank, the BoT. The pair sits slightly lower now, back at 36.55/60, so slightly weaker in USD terms for the session. Bloomberg states that the Thailand Government will look to nominate a more friendly BoT Chair person in September 2025 (when the position becomes available). The Chair can't influence monetary policy decisions as they don't seem to be a member of the MPC but can evaluate the governor's performance and weigh in on potential outside board member appointments.
• USD/INR is tracking modestly lower in early Wednesday dealings. We are back under 83.50, but only 0.1% stronger in Rupee terms. Tuesday highs were around 83.53, which were just below earlier YTD highs of 83.575. Yesterday saw a near 6% fall in onshore equities, the largest drop in 4yrs as Modi's government failed to secure an outright majority. A coalition around Modi's BJP-led alliance will be needed for Modi to continue as PM. Offshore investors sold around $1.5bn of local equities yesterday, nearly double the inflows seen on Monday's session (when exit polls suggested a strong Modi win). Early tones for equities look better today.
• USD/IDR got to fresh highs back to 2020 in early trade, touching 16290. We sit slightly lower now, last near 16270, still 0.30% weaker in IDR terms. The rupiah has underperformed the softer US yield backdrop in the past week or so. The US 10yr real yield is off more than 20bps from recent highs but this is yet to aid the IDR. To be sure, other cross asset signals are working the other way. Local equities are struggling to hold above the 7000 level and remain under the simple 200-day MA. Offshore investors have sold just over $2bn of local equities in Q2 to date, although outflows in June so far have been light. BI stated late yesterday that the FX should average 15700-16100 for 2024. The current YTD average is 15831, so slightly sub the 15900 midpoint expected by the central bank. Next year BI sees an average of 15300-15700