PMIs Steal Limelight

Worrying signals on momentum behind the recovery in China's manufacturing activity was the highlight of regional data, which translated into a mixed session for Asia EM FX. The Bloomberg/J.P. Morgan Asia Dollar (ADXY) index ground lower as the session progressed. Some of the greenback's broader strength may have been sapped by a fresh round of sales against the yen, which maintained its sharp appreciation trend started towards the end of last week.

• CNH: Spot USD/CNH crept higher, albeit immediate reaction to China's PMI data was rather limited. The pair last sits at CNH6.7650, up ~150 pips on the day, with participants studying the details of official & Caixin PMI surveys for July. The official m'fing gauge unexpectedly fell into contraction, while the Caixin counterpart undershot forecasts. Continued Sino-U.S. tensions over House Speaker Pelosi's potential stopover in Taiwan did no good for the redback.
• TWD: China's manufacturing data & geopolitical tensions across the Taiwan Strait weighed on the Taiwan dollar, which depreciated past TWD30 vs. the greenback for the first time since mid-2020.
• KRW: The Korean won took a beating as domestic data exacerbated the impact of offshore catalysts outlined above. South Korea's trade deficit widened to the second-worst result in a data series beginning in 2000, although shipments held up well, providing reassurance on external demand. Meanwhile, South Korea's M'fing PMI slipped into contraction for the first time since Sep 2020. On top of that, BoK Gov Rhee expressed preference for 25bp rate hikes over more aggressive moves, but did not rule out 50bp steps, depending on data.
• IDR: Spot USD/IDR crept higher, even as Indonesia's M'fing PMI showed a faster rate of expansion, while headline CPI slightly beat expectations (core printed in line with forecasts). A renewed drop in palm oil prices may have applied some pressure to the rupiah.
• MYR: Spot USD/MYR edged higher, holding a familiar range. The ringgit showed a muted reaction to Malaysia's latest PMI reading, which showed only marginal improvement.
• PHP: The Philippine peso softened as the local M'fing PMI reading showed a deceleration in the rate of expansion, with headline index down to 50.8 in July from 53.8 recorded in June. Worth noting that last Friday BSP Gov Medalla touted possible downward revisions to the central bank's inflation outlook for 2023 & 2024.
• THB: The baht outperformed as onshore markets re-opened after a long weekend and the overhang of moderation in hawkish Fed expectations kicked in. Thailand's M'fing PMI improved in July, despite some negatives in breakdown data, with the central bank's Business Sentiment Index coming up later in the day.