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Losses Grow (ex CNH)

ASIA FX

The J.P. Morgan ADXY index is now at fresh YTD lows. The index is close to the 102 level, lows going back to early June 2020. Considering the index is heavily weighted towards CNY, it indicates the degree of FX weakness elsewhere in the region.

  • Whilst USD/CNY is largely range bound, other pairs are printing fresh cyclical highs.
  • USD/KRW is comfortably above 1300, highs back to 2009. While USD/THB is above 36.00, levels last seen at the end of 2016.
  • USD/PHP has surged higher today as well, to 55.60, which highs back to 2005. USD/IDR has pushed through 15000 for the first time today since late 2020, while USD/INR is within striking distance of 79.50, and continues to set record highs.
  • Recessionary fears and broad USD strength continue to dominate. The chart below plots EUR/USD versus the ADXY. The beta with respect to EUR moves is not one, but lower levels are clearly dragging Asian FX sentiment down.
  • Positives like lower USD/JPY levels and softer commodity prices (particularly for oil), are largely reflective of recessionary fears. Hence there is little positive spill over to the region at this stage. Lower commodity prices will harm the terms of trade outlook for Malaysia, with USD/MYR threatening to break to fresh YTD highs, last 4.4253.
  • We are mindful that FX intervention risks are rising, but central banks in the region are more likely to curb excessive volatility rather than attempt to reverse trends.

Fig 1: EUR/USD & ADXY Trends

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The J.P. Morgan ADXY index is now at fresh YTD lows. The index is close to the 102 level, lows going back to early June 2020. Considering the index is heavily weighted towards CNY, it indicates the degree of FX weakness elsewhere in the region.

  • Whilst USD/CNY is largely range bound, other pairs are printing fresh cyclical highs.
  • USD/KRW is comfortably above 1300, highs back to 2009. While USD/THB is above 36.00, levels last seen at the end of 2016.
  • USD/PHP has surged higher today as well, to 55.60, which highs back to 2005. USD/IDR has pushed through 15000 for the first time today since late 2020, while USD/INR is within striking distance of 79.50, and continues to set record highs.
  • Recessionary fears and broad USD strength continue to dominate. The chart below plots EUR/USD versus the ADXY. The beta with respect to EUR moves is not one, but lower levels are clearly dragging Asian FX sentiment down.
  • Positives like lower USD/JPY levels and softer commodity prices (particularly for oil), are largely reflective of recessionary fears. Hence there is little positive spill over to the region at this stage. Lower commodity prices will harm the terms of trade outlook for Malaysia, with USD/MYR threatening to break to fresh YTD highs, last 4.4253.
  • We are mindful that FX intervention risks are rising, but central banks in the region are more likely to curb excessive volatility rather than attempt to reverse trends.

Fig 1: EUR/USD & ADXY Trends

Keep reading...Show less