Modest Appreciation As Equity Sentiment Stabilizes

Most of Asian FX is higher, in line with firmer equities. Outside of KRW though, moves have been modest. INR is still struggling to rebound and remains close to record lows.

• CNH: The bounce in USD/CNH above 6.7400 in early trade was faded by the market. We had a slightly stronger than expected CNY fixing, while June export growth was reportedly stronger than expected in CNY terms according to Bloomberg calculations (US$ estimates still haven't printed though). We got to the low 6.7200 region before support kicked in. A headline that a US warship had entered China waters helped push the pair higher, although there wasn't much follow through. The US Navy stated the ship in question obeyed international law. China equities are higher.
• KRW: The BoK hiked by 50bps to 2.25%, as expected. More hikes are expected, with tackling inflation the critical goal for the central bank. USD/KRW didn't react a great deal. The Kospi has traded firmer today, up 0.7%, aided by positive spill over from Taiwan markets. USD/KRW got to the low 1302 level, but we have edged back to 1304 now.
• TWD: Taiwan stocks have surged +2.85%. The National Financial Stabilization Fund received authorization to support local equities at the conclusion of a meeting yesterday. This is the first time such support has been enacted since the pandemic in 2020. USD/TWD is slightly lower at just under 29.88.
• INR: Spot USD/INR tried to push lower in early trade but has since rebounded back above 79.60. Onshore bond yields are down slightly, the 10yr just below 7.37%. Yesterday CPI for June printed slightly weaker than expected at 7.01%, versus 7.10% expected. IP growth was +19.6%, versus forecasts of +20.8%.
• IDR: Spot USD/IDR operates within a range that has defined the scope of price action during the last week or so. Spot remains just below 14990, while the 1 month NDF has edged back above 15000 from earlier lows. Indonesia's 5-Year CDS (one of the rupiah vulnerability indicators monitored by Bank Indonesia) keeps widening, reaching a new cyclical high of nearly 158bp today.
• PHP: Spot USD/PHP hit a new cycle high on Tuesday, as the Philippines reported a record trade deficit. The pair eased off this morning and is now trading slightly firmer at PHP56.35. Next resistance is at PHP56.500, an all-time high printed in 2004. The Philippines detected 60 new cases of Omicron subvariant BA.5 between Jul 7 and 11 but the Dept of Health said the situation remains under control.