US-China escalation curbs EMFX.....>

EMERGING MARKETS: US-China escalation curbs EMFX risk appetite

-While CNY is understandably take headline focus Monday, the broader EMFX is

also taking a decent hit, with trade-exposed currencies including the KRW and

TWD tumbling as global trade environment circles a further deterioration.

USD/KRW now trades clear of the early 2017 high, with options markets

positioning for further deterioration. The risk-off theme has fed further into

ZAR weakness, with USD/ZAR making a decent bid on 15.00. A rally through here

would be the first since early June. ZAR vols have also extended their July

uptick, trading at levels last seen in early June.

-Outside of the shift in the global trade picture, INR sits markedly weaker as

domestic tensions with Pakistan ratchet higher. The Indian government withdrew

the long-held autonomy of Kashmir, a move that will undoubtedly escalate the

territorial dispute with Pakistan. This saw USD/INR gap markedly higher at the

open and now sits above the 200-dma for the first time since March.

-Market focus remains on the US-China spat and the any response from Pakistan

over India's move on Kashmir.