NEA FX Steady, Some Softness in SEA Amidst Equity Weakness

For the most part it has been a quiet start to the week for Asia FX. USD/CNH has drawn selling interest above 7.2100, even with onshore equities generally under pressure. KRW and TWD have both been steady. In SEA we are seeing some USD strength, but it fairly modest at this stage. Tomorrow the data calendar is fairly quiet with South Korean retail sales and Q4 external debt on tap. Later on, Taiwan Jan export orders will print.

• USD/CNH has tracked ranges from late last week. We couldn't sustain moves above 7.2100, last near 7.2040, little changed for the session. Equity sentiment has mostly weakened as markets digest recent regulatory moves, while efforts to boost auto and other consumer durable consumption has only benefited some sectors today. Later in the week we get the official PMIs for Feb.
• 1 month USD/KRW was firmer in the first part of trade, but now sits back at 1328, unchanged from end NY levels on Friday. Local equities are weaker, as the government announced measures to reduce the valuation gap. Still, we are away from lows, the Kospi last down -0.45%, (we were off around 1.4% earlier).
• Spot USD/TWD and the 1 month NDF are very steady. Both pairs last near 31.55, not too far off YTD highs. TWD weakness comes despite generally strong tech equity sentiment. Also note last week saw positive equity inflow momentum, albeit fairly modest at $567.2mn. Feb to date has seen +$3.67bn in net inflows though. An offset is clearly coming from the push out in Fed rate cut timing. Given low levels of yields onshore, sensitivity is likely to US yield developments. The US -TW 2yr swap rate differential is +362bps, not too far off recent highs. J.P. Morgan also note that poor FX conversion (from overseas) earnings is another meaningful TWD headwind.
• Spot USD/IDR is back close to 15630, while the 1 month NDF is near 15640, bother around 0.2% weaker in IDR terms versus prior closing levels. Dips once against the pair sub 15600 have been supported. Local equities have struggled in recent session while equity inflow momentum cooled at the end of last week. We also had outflows from local bonds last week.
• Spot USD/SGD is slightly higher, last near 1.3445. Recent lows come in at 1.3394. The SGD NEER (per Goldman Sachs estimates) has drifted a little wider relative to the top end of the band (last -0.42%). We did get to -0.29% last week. Last Friday, CPI data was weaker than expected, while today Jan IP figures also feel more than forecast (-5.7% m/m, versus +3.1% expected). The fall was driven by weakness in the volatile Pharma sub sector but still recent data outcomes have weighed on SGD outperformance at the margins.