Risk Aversion Saps Strength From Asia EM FX

Persistent defensive feel sapped strength from most Asia EM currencies, as global geopolitical frictions and the spectre of Fed tightening loomed large.

• CNH: Spot USD/CNH held a very tight range, despite expectations that the PBOC would continue easing policy. Reuters sources suggested that China's central bank could cut SLF rates as soon as next Monday. Elsewhere, SAFE's spokeswoman said that the knock-on effects from Fed tightening are expected to be smaller than before.
• KRW: Spot USD/KRW crept higher on the back of broader risk aversion. South Korea's Vice FinMin Anh said that officials stand ready to take all available steps to stabilise bond markets in case of excessive volatility.
• IDR: Offshore pressure hit the rupiah, which sold off even as Bank Indonesia shed some light on its policy normalisation plans on Thursday. Policymakers look to raise the RRR to 5% in March, with further hikes pencilled in for later this year.
• MYR: Spot USD/MYR swung into a loss, with the ringgit outperforming all of its Asia EM peers. Participants assessed Thursday's stand-pat decision from Bank Negara Malaysia and a marginal beat in December CPI.
• PHP: Spot USD/PHP held in positive territory, operating in close proximity to recent cycle highs at PHP51.500.
• THB: The baht retreated as daily Covid-19 cases rose to a two-month high ahead of the imminent relaxation of border rules. Thailand's Commerce Ministry said they expect the baht to remain at favourable level for exports, as customs trade balance unexpectedly flipped into a deficit.