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Philippines' Peso Weakness Continues

ASIA FX

PHP depreciation continues, as the BSP’s gradualist approach to rate hikes continues to weigh. Spot USD/PHP is close to 55.00. CNH and KRW are slightly firmer, although the won has lagged the local equity rebound. Mixed trends have been seen elsewhere.

  • CNH: USD/CNH has drifted lower through the course of the session. We dipped below the overnight low of 6.6950 and got sub 6.6900 before some support emerged. China equities are higher, but there have been better performers within the region. The USD/CNY fixing bias was close to neutral.
  • KRW: USD/KRW finally saw some selling interest, although has lagged the +2% gain in local equities. The 1 month NDF got to 1295, but we are now back above 1298. US Treasury Secretary will reportedly visit South Korea in July. FX could be on the agenda, given FX stability made into the joint leader’s statement between the two Presidents in May.
  • SGD: USD/SGD is modestly lower on the day, tracking back to 1.3880. Calls for a potential intra-meeting policy tightening from the MAS continues to grow after yesterday's stronger than expected inflation data. The SGD NEER is around 0.35% below the top end of the MAS band.
  • PHP: USD/PHP has climbed to a new cyclical high today. We got close to 55.00 and currently sit at 54.95. Yesterday's 25bp rate rise was consistent with the BSP's stated preference for more gradual tightening (i.e. reluctance to hike by 50bp), signalled by incoming Gov Medalla on the eve of the announcement. The new Governor also stated today that FX intervention is only designed to curb volatility and the central bank is not defending the peso.
  • IDR: USD/IDR spot is slightly higher, back close to 14850. As widely expected, BI left rates on hold yesterday. For now, Bank Indonesia will keep draining liquidity from the system as the preferred way of tightening policy. On the FX front, the Bank stands ready to intervene if needed, but is not particularly worried about recent rupiah depreciation.
  • THB: USD/THB opened higher but has seen some selling interest above 35.55. The BoT said Thursday that headwinds to global growth are likely to result in a slowdown in exports, which will be the "main challenge" for the Thai economy later this year. Overseas shipments have been key for Thailand's post-COVID recovery amid weak domestic consumption and struggling tourism industry.

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