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USD/CNH Higher On Growth Fears

ASIA FX

The main story today has been the resurgent USD/CNH trend. The pair has climbed +0.60% from NY closing levels, as growth fears weigh. Most other USD/Asia pairs have been dragged higher as a result.

  • CNH: USD/CNH is pushing back through 6.7500, as the Premier's warning on the growth backdrop has hurt sentiment today. Local equities are holding up reasonably well, but we have seen lower onshore yields, while the fixing bias was close to neutral. The 10yr bond yield is threatening to breakdown to fresh multi-month lows (sub 2.74%, current is 2.75%).
  • KRW: 1 month USD/KRW has been dragged higher by USD/CNH moves, now back close to 1269 (now 0.20% higher on the day). Earlier we had a hawkish 25bps hike by the BoK, which sent onshore yields up but this did little to aid the won.
  • SGD: USD/SGD is up only a touch higher from NY closing levels, so some outperformance versus the rest of the region. IP figures came in mixed, with the MoM weaker than expected but YoY still solid at +6.2%.
  • MYR: USD/MYR is higher but spot remains sub 4.4000 for now. Malaysia's consumer prices rose 2.3% Y/Y in April, matching consensus forecast. But food inflation reached a four-year high of +4.1% Y/Y, led by firmer dairy prices.• The Agriculture Ministry followed up noting that it held a meeting on measures to address food security issues. The Ministry will present its suggestions at the May 30 Cabinet meeting.
  • PHP: USD/PHP is also higher, with spot close to 52.50, but in line with the regional trend. Bloomberg reported that Philippines President-elect Marcos will tap BSP Gov Diokno as the new Finance Secretary. Diokno also told Bloomberg Wednesday that the benchmark policy rate will likely be raised by another 25bp at the next MPC meeting.
  • INR: USD/INR is drifting higher in early trade, with spot pushing up to 77.60. Moves towards 77.70 or slightly above have not been sustained in recent sessions, so be mindful of intervention risk. A positive energy price backdrop (Brent crude above $114/bbl) can still test the authorities resolve though.

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