South East Asia Currencies Hold Gains Better Than North Asia

USD/Asia pairs started the session off on a weaker note, before USD sentiment stabilized. USD/CNH is up from earlier lows, last near 7.1450. It has been a similar backdrop elsewhere, although South East Asia currencies have generally been able to hold onto some gains against the USD. We still have July Taiwan export orders to come. Tomorrow we have the BI and BOT decisions. No change is expected from either central bank.

• USD/CNH got to lows of 7.1200 in early trade before rebounding back towards 7.1500 and finding some selling interest. USD/JPY has been supported on dips so far today, a yuan headwind at the margins. Local equities are also weaker onshore, weighed by fresh property market concerns. The USD/CNY fixing fixing fell, but remain above the 7.1300 level.
• USD/KRW spot got to fresh lows of 1325.25, but now sits back near 1335, little changed for the session. Equity markets are higher, but the Kospi is sub the 2700 level at this stage. Spillover from weaker yen and yuan levels has been evident. On the data front, consumer sentiment fell, but households expectations for house prices surged further, which is a watch point for the authorities. Today it was announced that mortgage rules would be tightened from September 1.
• USD/TWD spot has weakened sub 32.00, but the 1 month NDF is little changed from end NY levels on Monday, last around 31.74. Taiwan equities have struggled for fresh gains today. Coming up later we have July export orders.
• USD/IDR is under 15500 in latest dealings, around 0.50% stronger in spot terms. Like elsewhere in South East Asia, we are closing in on earlier YTD lows (around the 15400 level). The pair is in oversold territory, a theme familiar in other parts of South East Asia FX. Still, IDR remains 0.50% weaker in YTD terms and is lagging SGD and MYR positive returns seen so far this year (in spot terms, with MYR the clear standout). Tomorrow we have the BI decision. Some in the market see risks of a cut, but our bias is for no change. As we noted in our preview: It is highly unlikely to want to risk recent rupiah gains by cutting ahead of the Fed, which is generally expected to begin easing on September 18.
• USD/THB is in the 34.30/35 region in latest dealings, +0.30% firmer in baht terms for the session so far. Earlier lows were at 34.205, which was close to lows from the start of the year near 34.10.• The pair is oversold, with the RSI (14) at 21.3 currently. The pair has been in oversold conditions for much of August though since we broke down through 35.00. The 20-day EMA based off yesterday's close is back at 35.45.• USD/THB has caught up with the sharp decline in US-TH 2yr government bond yield differentials (last +186bps). These trends have stabilized somewhat though and may not materially in the near term, given we have the BOT tomorrow (although no change is expected by the economic consensus) and then Fed Chair Powell speak later in the week.