USD/Asia Crosses Firm Amid Widening U.S.-China Policy Gap, Geopolitics Undermine KRW

All eyes were on China as the NBS released quarterly GDP figures and monthly economic activity data, while the PBOC slashed the interest rates applied to its 1-year MLF operations and 7-day reverse repo operations by 10bp apiece. On top of that, Friday’s after-hour USD purchases reverberated across the re-opening onshore markets in the region.

• CNH: Spot USD/CNH crept higher in early trade but pulled back (albeit in a gradual manner) after the data dump hit the wires. The economic growth slowed to +4.0% Y/Y in the final quarter of 2021 but topped median estimate of +3.3%, with YTD growth at +8.1% Y/Y, comfortably above the government's target of "over +6.0%." Industrial output grew faster than expected in December, but retail sales printed below consensus forecast, while the unemployment rate unexpectedly edged higher. Earlier in the session, offshore yuan showed muted reaction to interest-rate action from the PBOC, even as the outcome (in terms of the rate cuts, their magnitude, and the size of the liquidity injection) was more dovish than expected by most analysts.
• KRW: The South Korean won was the worst performer in Asia EM space, as North Korea conducted its fourth missile test this year, rubbing salt into the wounds of the risk-sensitive currency. The DPRK fired two suspected ballistic missiles eastwards from an airfield in Pyongyang, pouring fuel on a simmering regional geopolitical tension.
• IDR: Spot USD/IDR jumped after the re-open before trimming some gains, with Friday's after-hours move in U.S. Tsy yields being the main driver. Indonesia's trade surplus shrank way more than forecast in December, as the slowdown in exports growth proved more pronounced than expected.
• MYR: Spot USD/MYR followed a similar trajectory as USD/IDR, trimming its initial gains over the course of the Asia-Pac session. The local headline flow was fairly light.
• PHP: The Philippine peso remained on the back foot, as Cabinet Sec Nograles announced Friday that the current virus restrictions in Metro Manila will remain unchanged through the month-end. BSP Gov Diokno said Saturday that the Philippines can meet it inflation forecasts for 2022 & 2023 unless crude oil prices top $95/barrel.
• THB: Spot USD/THB stayed in positive territory, as domestic headline flow failed to offer much of real note.