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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
ASIA FX
Intervention risks are rising for Asian currency pairs, but fundamentals still point to a challenging outlook.
- The RBI made headlines overnight, when newswire sources noted that it intervened in the FX market to defend the rupee. This came after the currency dropped to a record low against the USD (USD/INR rose above 77.50).
- Bank Indonesia also noted yesterday that it would stabilize the rupiah if necessary. Spot USD/IDR is close to fresh 1 year highs of just above 14550.
- Korean authorities have also spoken about the need to stabilize markets as well in recent weeks.
- China is leaning against depreciation risks, with a stronger fixing bias, although this bias is probably best described as modest rather than strong.
- USD/HKD also hit the top end of its trading band at 7.8500 today.
All USD/Asia pairs are comfortably above their respective 200 day MAs, see the first chart below.
- Asian central banks will be mindful of how quickly local FX has depreciated and are unlikely to welcome markets becoming too one-sided if history is a guide.
- Such rhetoric or increased FX intervention is likely to remain part of the FX landscape going forward.
Fig 1: USD/Asia Deviation From 200-Day MA (%)
Source: MNI - Market News/Bloomberg
If we take an unweighted average of the deviation from the 200 day MAs we get a result just above 4%, see the second chart below.
- The other line on the chart is the ADXY index, which is inverted. Historically, the deviation has tended to peak between 4-6%, on average, for USD/Asia pairs.
- A definitive peak in USD/Asia pairs won't come until the fundamental backdrop has meaningfully improved.
- Still, intervention risks can still impact sentiment on a daily/intra-day basis.
Fig 2: Average Deviation From 200-Day MA For USD/Asia And ADXY index
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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