Official Rhetoric Steps Up To USD Strength

Rhetoric from a number of central banks rose again today around USD strength. The PBoC pledged to keep CNY stable, the South Korean FinMin stated it will act on FX if needed, while BI said it will be in the market to ensure supply/demand balance. The BoT decision is still to come, it remains a close call between no change and a +25bps move. Outside of Thailand industrial production, the data calendar is light tomorrow.

• USD/CNH dipped in early trade, as we had another much stronger than expected CNY fixing, while the PBoC pledged policy support to bolster the recovery. It also stated it will keep CNY stable and curb excessive moves. Onshore and HK equities opened higher, but are away from best levels. USD/CNH couldn't get sub 7.3000. The pair last tracks near 7.3120. Spot USD/CNY is back above 7.3050.
• 1 month USD/KRW sits lower, last near 1347. Earlier highs were at 1353.40. Onshore equities are lower, but only modestly at -0.20%. Local news wire Yonhap reported that key chipmakers (including Samsung) may get an indefinite waiver over chip export controls to China. The FinMin also stated that the country will take steps on FX if needed.
• Spot USD/HKD sits above recent lows. The pair last near 7.8210. Earlier highs were seen close to 7.8240, while Monday's low was just under 7.8140. Broader USD gains have likely slowed HKD appreciation to some extent, with the BBDXY pushing to fresh YTD highs in recent sessions. Yield differentials have nudged back in favor of the USD but only at the margin. The 3-month US-HK spread sits back at +17bps, we were +13.5bps yesterday.
• The Rupee has opened dealing in line with yesterday's closing levels, USD/INR last prints at 83.21/24. On Tuesday firmer Oil prices and broader USD flows saw USD/INR firm ~0.3% to sit a touch off YTD highs and within sight of all time highs for the pair. Equity outflows continued on Monday with ~$167mn in net outflows, this brings the total in September to ~$1.67bn in total outflows on track be to the highest on record.
• USD/MYR has printed a fresh YTD high breaking above the 4.70 handle for the first time since November 2022 as the higher for longer Fed mantra boosts the USD. The data docket is empty this week, the next data of note is next Monday's S&P Global MFG PMI for September.
• The SGD NEER (per Goldman Sachs estimates) sits a touch off yesterdays cycle highs, holding a narrow range this morning. We now sit ~0.5% below the top of the band. Broader USD trends continue to dominate flows for USD/SGD, the pair printed a fresh cycle high as the USD continues to strength as the higher for longer rates narrative continues to be the main driver in USD/Asia. The pair is up ~0.1% last printing at $1.3705/10.
• The path of least resistance for USD/IDR still appears skewed higher. The pair is making fresh highs above 15500 in the first part of trading today (last at 15543), off 0.34% in IDR terms. The combination of weaker global equity market sentiment, higher US real yields and broader USD gains all appear to be weighing on the rupiah. BI reiterated that it remains in the market to maintain supply/demand balance.
• USD/PHP sits at 56.935, which is down from earlier highs near 56.98. Lows for the session sit just under 56.90. The near-term focus remains on whether we can test above the 57.00 level, which has been a resistance point in recent months and a likely BSP intervention zone (something hinted at in terms of recent official rhetoric).
• USD/THB has risen to fresh highs of 36.565, a loss of 0.55% in baht terms. We still have the BoT decision to come. We sit in the +25bps hike camp, but it is likely to be a very close call.