Only Marginal Benefit From Higher Equities To Local FX

USD/Asia pairs are mixed. Tracking somewhat tight ranges, despite the positive equity tone in the region. Higher beta plays have underperformed gains seen in AUD and NZD. Still to come is Taiwan inflation data. Note tomorrow we get China trade figures, along with Thailand CPI data.

• USD/CNH sits near 7.1650 in recent dealings, slightly below Tuesday closing levels in the US. Onshore spot opened higher, but couldn't get beyond the 7.1600 handle. Headlines crossed from Rtrs around state bank selling of USDs again to keep depreciation pressures in the aftermath of the Moody's rating outlook change. Equity sentiment has improved modestly, amid share backs and broader gains in the region.
• USD/TWD sits just off session highs, last near 31.50. Late Nov lows in the pair coincided with a test of downside support at the 200-day MA (currently near 31.30), which held. Highs from the second half of Nov came in around 31.65, which is also close to the current 20-day EMA. We have only just returned to positive YTD inflows, so there may be upside momentum if tech related sentiment improves further. In turn this may cap USD/TWD upside. Working the other way is TWD's unappealing carry characteristics, TWD forward points (3 month) remain comfortably in negative territory, albeit up from recent lows). Note the US-TW2yr swap rate differential is back to +366bps, around multi month highs.
• The Rupee has opened dealing a touch above yesterday’s closing levels however ranges are narrow. Onshore participants are digesting yesterday's move lower in US Tsy Yields seen after a softer than forecast JOLTs report. USD/INR prints at 83.36/37. A reminder that yesterday S&P Global India Services PMI printed at 56.9, the lowest level since November 2022.
• USD/MYR continues to observe the narrow 4.63/70 range has persisted for the most part since early November, trading remains stable and moves have had little follow through. In early dealing today the pair is a touch higher and last prints at 4.6735/60. A reminder Fortnightly Foreign Reserves tomorrow provide the only data of note this week. There is no estimate and the prior read was $110.5bn.
• The SGD NEER (per Goldman Sachs estimates) is little changed this morning, we remain a touch off recent cycle highs and well within recent ranges. The measure sits ~0.3% below the top of the band. USD/SGD firmed above the $1.34 handle, ticking higher yesterday despite a fall in US Tsy Yields and a strong November PMI print as perhaps a weak Retail Sales print weighed on the SGD. On Wednesday we sit at $1.3405/10.
• USD/THB sits off recent highs, last near 35.14. Recent highs have come close to the 200-day EMA (35.275), although onshore markets were closed yesterday, which would have impacted liquidity. The low on Monday was 34.71, which is keeping THB implied vol high. The 1 month was last at 9.57%, fresh highs back to April of this year. The THB is the second worst performer in the EM Asia FX space over the past 5 sessions, down a little over 1%. (the won is the worst -1.85%). The continued underperformance of local stocks is a factor, the SET barely off recent lows (+0.18% today). Underwhelming economic growth hasn't helped sentiment in this space.
• USD/PHP is not too far off recent lows, last at 55.325. Lows on Monday were at 55.24, levels last seen in early August. We are seeing some modest PPH outperformance despite higher BBDXY levels, but the divergence is only modest at this stage. Peso bulls will target a move towards 55.00, while on the topside, recent highs have been between 55.55/60. Note the 20-day EMA is around 55.64.• PHP may be getting some support for positive seasonality. In 4 out the last 6 Dec, PHP has risen against the USD in Dec. This may reflect remittance related inflows.