Risk-Off Tone Weighs; Surprise MAS Action Bolsters SGD

Continued risk-off flows fuelled by the familiar combination of geopolitical risks & imminent Fed tightening sapped strength from Asia EM currencies, with a handful of exceptions. CNH grew stronger ahead of the LNY holidays, while SGD received a boost from unexpected monetary policy action.

• SGD: The Singapore dollar caught a bid and printed its best levels since Oct 21, after the MAS announced a surprise decision to tighten policy, joining the growing pack of monetary authorities scrambling to tame inflation. The MAS said they will "slightly raise" the appreciation rate of their S$NEER policy band, while keeping its width and centre level unchanged. It was the first unscheduled policy action from the MAS since 2015 and came on the heels of above-forecast CPI data released on Monday.
• CNH: Spot USD/CNH held a tight range. The yuan fix fell in close proximity to sell-side expectations, even as a BBG real-time tracker of redback strength against a basket of currencies surged to an all-time highs.
• KRW: The won went offered on the back of risk broader aversion. The news that South Korea's daily Covid-19 cases hit an all-time high while North Korea may have test-launched two cruise missiles added pressure to the KRW, with South Korea's growth data provoking a muted reaction. Meanwhile, South Korea said it is looking to ease rules on foreign investors' access to local FX markets.
• MYR: The ringgit traded sideways, holding a narrow range. PM Ismail Sabri noted that Malaysia considers relaxing Covid-19 rules for international travellers.
• PHP: The peso trimmed its initial losses. Philippine officials are set to discuss tweaks to Covid-19 Alert Level settings on Thursday, amid suggestions that Metro Manila could be moved down by one notch to Level 2.
• The likes of IDR and THB extended losses on the back of broader market impetus, as domestic headline flow failed to provide much in the way of notable catalysts.