Pre-FOMC USD Weakness Aids Asia EM FX, Baht Supported By Equity Inflows

The BBG/J.P. Morgan Asia Dollar Index (ADXY) crept higher, consolidating above the 96 figure, as the greenback lost shine across the board. Reflections ahead of the FOMC meeting today came to the fore, while regional participants scrutinised recent signals on the outlook for China's COVID-Zero policies.

• CNH: Greenback weakness helped USD/CNH fall for the second consecutive day, even as the PBOC set its USD/CNY mid-point at a new cyclical high going back to early 2008. Gov Yi spoke at a Hong Kong event, vowing to keep the exchange rate stable.
• KRW: Spot USD/KRW operated above neutral levels as heightened geopolitical risk prevented the South Korean won from strengthening. North Korea fired its largest daily barrage of missiles on record, hitting international waters south of the inter-Korean maritime boundary known as the Northern Limit Line.
• IDR: The rupiah was among the worst performer in the region, after data released Tuesday showed that inflationary pressures in Indonesia eased across headline and core price measures, raising questions about the magnitude of Bank Indonesia's next rate move.
• MYR: The ringgit softened, with USD/MYR refreshing its 24-year highs, ahead of Bank Negara Malaysia's monetary policy decision tomorrow. The local FX space ignored a continued rally in palm oil prices.
• PHP: Spot USD/PHP advanced as onshore markets re-opened after a holiday. The BSP released a statement pointing to the need to smoothen FX moves.
• THB: The baht was among the best performers in emerging Asia amid positive developments in Thai equity markets. Foreign inflows continued to pick up, while the SET index tested its 200-DMA following a breach of the 50-DMA.