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USD/Asia Pairs Higher On Equity Weakness, CNH Outperforms As PBoC Vows Stability

ASIA FX
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Outside of the yuan, USD/Asia pairs sit higher across the board. Carry over USD strength and equity risk off have been clear headwinds for FX in the region, as we approach month end. The KRW, IDR and THB have fallen the most in spot terms. Still to come today is Taiwan Q1 GDP revisions. Tomorrow, we have the official PMI prints for May in China. Also out is South Korean IP, Thailand trade data and Indian GDP figures.

  • USD/CNH has drifted sub 7.2700 today, a modest gain in CNH terms. The USD/CNH fix was set a touch higher, while onshore equities are down modestly. Still, we heard from Tao Ling, deputy-Governor of the PBoC. She stated the central bank will support the growth of the offshore yuan (see this link for more details). She also noted that the exchange rate should be basically stable and easy to use (borrowing off President Xi's 'powerful currency' concept per BBG).
  • 1 month USD/KRW has spent most of the session on the front foot. We were last at 1376, 0.50% weaker in won terms, while spot was down 1%. The weaker global and local equity backdrop is weighing on FX sentiment. We aren't too far away from earlier May highs near 1380.
  • USD/IDR is up a further 0.55%, last tracking near 16250, which is on session highs. We are close to late April levels above 16280, while the YTD high was at 16288. Hence, we wouldn't be surprised to see some step up in official rhetoric or actual intervention if we breach these previous highs. Cross asset headwinds continue to be evident for the rupiah. Local equity market weakness has been particularly prevalent in recent sessions. The JCI has broken sub its simple 200-day MA, off a further 1.5% today. Earlier we hit fresh lows in the index back to late November last year, although we are up from these levels in recent dealings.
  • Spot USD/HKD continues to recover from earlier May lows sub the mid point of the peg band. We were last near 7.8160, above the 20-day EMA (near 7.8125), but still sub the other key EMAs (the 200-day at 7.8210 is the highest). Yield momentum has turned back in favor of the USD in recent weeks. The US-HK 3 month differential is back to +66bps up a touch from recent lows.• US 3 month yields have risen a touch while HKD Hibor rates are off recent highs (3 month back to 4.74%). The broader US yield backdrop has certainly added higher USD levels against the CNY and JPY, which will be impacting HKD to a degree.
  • USD/THB has climbed a further 0.50 to be back at 36.90/95, not too far off 2024 highs above 37.00. We did have better than expected Manfacturing data, up 3.4%y/y for April (against a -1.3% forecast). This was the first positive print since Sep 2022. Still, capacity utilization fell in the month. The BoT also defended its 1-3% inflation target but stands ready to adjust policy if economic conditions change (per BBG).
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Outside of the yuan, USD/Asia pairs sit higher across the board. Carry over USD strength and equity risk off have been clear headwinds for FX in the region, as we approach month end. The KRW, IDR and THB have fallen the most in spot terms. Still to come today is Taiwan Q1 GDP revisions. Tomorrow, we have the official PMI prints for May in China. Also out is South Korean IP, Thailand trade data and Indian GDP figures.

  • USD/CNH has drifted sub 7.2700 today, a modest gain in CNH terms. The USD/CNH fix was set a touch higher, while onshore equities are down modestly. Still, we heard from Tao Ling, deputy-Governor of the PBoC. She stated the central bank will support the growth of the offshore yuan (see this link for more details). She also noted that the exchange rate should be basically stable and easy to use (borrowing off President Xi's 'powerful currency' concept per BBG).
  • 1 month USD/KRW has spent most of the session on the front foot. We were last at 1376, 0.50% weaker in won terms, while spot was down 1%. The weaker global and local equity backdrop is weighing on FX sentiment. We aren't too far away from earlier May highs near 1380.
  • USD/IDR is up a further 0.55%, last tracking near 16250, which is on session highs. We are close to late April levels above 16280, while the YTD high was at 16288. Hence, we wouldn't be surprised to see some step up in official rhetoric or actual intervention if we breach these previous highs. Cross asset headwinds continue to be evident for the rupiah. Local equity market weakness has been particularly prevalent in recent sessions. The JCI has broken sub its simple 200-day MA, off a further 1.5% today. Earlier we hit fresh lows in the index back to late November last year, although we are up from these levels in recent dealings.
  • Spot USD/HKD continues to recover from earlier May lows sub the mid point of the peg band. We were last near 7.8160, above the 20-day EMA (near 7.8125), but still sub the other key EMAs (the 200-day at 7.8210 is the highest). Yield momentum has turned back in favor of the USD in recent weeks. The US-HK 3 month differential is back to +66bps up a touch from recent lows.• US 3 month yields have risen a touch while HKD Hibor rates are off recent highs (3 month back to 4.74%). The broader US yield backdrop has certainly added higher USD levels against the CNY and JPY, which will be impacting HKD to a degree.
  • USD/THB has climbed a further 0.50 to be back at 36.90/95, not too far off 2024 highs above 37.00. We did have better than expected Manfacturing data, up 3.4%y/y for April (against a -1.3% forecast). This was the first positive print since Sep 2022. Still, capacity utilization fell in the month. The BoT also defended its 1-3% inflation target but stands ready to adjust policy if economic conditions change (per BBG).