USD/Asia Pairs Edge Down From Recent Highs, Led By USD/CNH

Most USD/Asia pairs sit away from recent highs, particularly in terms of USD/CNH, where defense of the yuan has stepped up today. Elsewhere USD losses are fairly modest at this stage, but for pairs like USD/THB and USD/PHP there seems a reluctance for higher levels in the near term. Taiwan inflation data is still to come today, while the main focus tomorrow will be on the RBI decision (no change expected). Q2 GDP in the Philippines is also out, while China July credit figures are due over the next few sessions.

• Spot USD/CNH was firmer in earlier trade but couldn't sustain momentum above 7.2400. The CNY fix was much stronger than expected, the fixing error re-widening to beyond -500pips. July inflation data was close to expected, but does suggest that the worst of the deflation impulse may be behind us. Reuters also reported that state banks were selling USDs onshore. Onshore equities are struggling for positive traction but are away from session lows. USD/CNH was last under 7.2200.
• 1 month USD/KRW is sits away from session highs, last in the 1315/16 region. Earlier we got close to Tuesday session highs around the 1320 level. The won has largely ignored the better onshore equity tone, although this appears to have been retail investor led, rather than by offshore investors. Earlier data showed a tick up in the unemployment rate to 2.8% from 2.6%.
• USD/HKD spot sits just off recent highs, last at 7.8150/55. Earlier highs were just above 7.8160. The recovery in the pair has continued, in line with broader USD trends. We are now back above the 20-day EMA (which is no longer declining). The 50-day sits higher, just under 7.8200. Early August lows sit back close to 7.7925. US-HK 3 month rate differentials are ticking higher, although more so due to a modest pull back in 3 month Hibor, which is back under 5.20%, against recent highs around 5.43% at the start of the month.
• The Ringgit printed its lowest level since mid-July yesterday, as July's gains continue to be trimmed. USD/MYR sits at 4.5775/4.5805, we sit ~1.7% firmer in August thus far after the 200-Day EMA (4.5053) provided support to the pair in late July. Industrial Production fell more than forecast in June, printing at -2.2% Y/Y. A print of -1.0% had been expected. Manufacturing Sales Value printed at -4.0% Y/Y. A reminder that the local docket is empty for the remainder of the week.
• The SGD NEER (per Goldman Sachs estimates) has firmed in early dealing this morning, the measure has ticked away from its lowest level since early July which was printed yesterday. We now sit ~0.6% below the top of the band. USD/SGD is ~0.1% lower on Wednesday, broader greenback trends are dominating flows today, the pair last prints at $1.3455/65. The pair is trimming some of yesterday's 0.5% gain. The local docket is empty until Friday when the final read of Q2 GDP is due. There is no estimate and the prior read was 0.3% Q/Q.
• Bank of Thailand governor Sethaput spoke today and his tone was similar to his comments in July which were followed by a 25bp rate hike. However today he didn’t reiterate that there was no need to end policy normalisation. Decisions will continue to focus on the outlook rather than individual data points but there is now a chance of a pause or another hike at the September 27 meeting. But now is not the time to start easing. Many economists expect that tightening is done this cycle given low inflation and growth uncertainties. USD/THB sits under 35.00, highs for the session have been marked at 35.07, with near term resistance around this point.
• USD/PHP sits below earlier highs. The pair opened above 56.40, but we now sit back near 56.29. This mirrors yesterday's session to some extent, as we got close to 56.40 before retracing during the early parts of Tuesday trade. The 56.40/45 region is right on previous YTD highs, so it appears to be somewhat of a resistance point in the near term. Agricultural output fell -1.30%y/y in Q2, versus +2.10% in Q1. Note tomorrow we get Q2 GDP, with the market consensus at +0.69% q/q (prior 1.1%) and +6.0% y/y (prior 6.4%). Earlier on the data front we had June unemployment tick higher to 4.5% from 4.3%.