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USD/Asia Pairs Higher, But CNH Steady

ASIA FX

USD/Asia pairs are mostly higher in the first part of Tuesday trade. A firmer US yield backdrop and weaker regional equity sentiment have been headwinds, although these have faded as the session progressed. The cut in China's 5yr LPR by a record 25bps hasn't shifted sentiment positively either. CNH has outperformed at the margins, with headlines of intervention crossing post the LPR cut. Tomorrow, we have South Korea PPI and business confidence early, then the first 20-days of Feb trade data prints. Later on, the BI decision is due, no change expected.

  • USD/CNH spiked on the announcement of the larger than expected cut to 5yr LPR rate. We got to highs of 7.2185, but quick fell back below 7.2100. We last tracked near 7.2100. Reuters reported that onshore banks had been selling USDs to curb the yuan weakness. Note onshore spot has remained sub 7.2000. This was designed limit fallout for the yuan post the LPR cut. Local equities are still struggling for positive traction, not inspired by the cut at this stage.
  • 1 month USD/KRW has climbed, albeit while remaining in recent ranges. We are were last near 1336, around 0.25% weaker in won terms for the session. Local equities have seen a sharp pull back of -1.2%, perhaps on profit taking flows given the recent strength. Offshore investors have sold -$66.3mn of local shares so far today. Earlier we had Feb consumer sentiment print, with the headline rising, while consumer inflation expectations were steady at 3%.
  • USD/THB got close to fresh YTD highs earlier, getting to 36.185. We sit slightly lower now, last near 36.15, still down by 0.35% in THB terms. Early comments from PM Srettha, calling for an unscheduled BoT meeting to cut rates has clearly weighed on sentiment. A break above 36.20 could see 36.33 (early Nov 2023 highs) targeted.
  • The USD is modestly firmer elsewhere. Spot USD/IDR has drifted higher, last near 15660, around 0.20% weaker in spot IDR terms. Tomorrow's BI decisions is expected to see rates left on hold. BI Governor Warjiyo said that the window to begin easing is H2 2024, but a material and sustainable appreciation in the rupiah and the start of Fed rate cuts are probably going to be needed first, unless growth slows sharply and inflation with it.

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