USD/Asia Pairs Mixed, TWD Outperforms On Local Equity Surge

USD/Asia pairs are mixed in the first part of Friday trade. TWD has been the strongest performer amid a sharp rise in local equities fueled by tech optimism. KRW is also up, but only is trailing TWD. CNH is close to unchanged and remains within recent ranges. PHP and MYR are modestly weaker in SEA FX. Early next week the focus will be on South Korean first 20-days trade data for Jan, along with China's LPR outcomes (although no changes are expected).

• USD/CNH saw a brief dip sub 7.2100, but had no follow through. The pair is back near 7.2140 in recent dealings, little changed for the session. The tone to the break in onshore equities has been to retrace some of yesterday's afternoon bounce. The CSI 300 is off by around 0.30% at this stage.
• 1 month USD/KRW was lower in the first part of trade, but had little follow through, finding support near 1331.40. We were last near 1335, around 0.15% stronger in won terms versus Thursday NY closing levels. Onshore equities are higher but away from best levels, the Kospi last +0.8%. North Korea rhetoric rose further on headlines the country has tested an underwater nuclear weapons system. This has likely weighed on South Korean asset sentiment. albeit at the margins.
• TWD is outperforming in the Asia FX space in the first part of Friday trade. The 1 month USD/TWD NDF is back into the 31.20/25 region, around 0.60% stronger in TWD terms. The main positive catalyst for TWD is the rebound in local shares. The Taiex is up +2.5%, led by gains in tech bellwether TSMC. The company sees a return to solid growth this quarter, with the positive outlook aiding Wall St sentiment in Thursday trade (BBG). For TWD this may help reverse some of the sharp equity outflows we saw earlier in the week. Up to Thursday we had seen -$4.5bn in net outflows, the largest since March 2022.
• USD/PHP has crept higher, the pair last near 55.95, around 0.2% weaker in PHP terms. Recent dips sub the simple 200-day MA (55.85) haven't proven sustainable. Still, PHP has only been outperformed by HKD and INR within the EM Asia FX space YTD. The overall BoP position returned to surplus in Dec, +$642mn, versus -$216mn in Nov.
• USD/MYR has firmed back above 4.7200. This is close to mid Nov 2023 highs in the pair. A weaker than expected Q4 GDP print, +3.4% y/y (4.41 forecast) has weighed at the margins. Dec trade figures also saw weaker than expected export growth (-10%y/y, versus -5.0% forecast). Next week we have the BNM decision, although at this stage, no change is expected (policy rate currently 3.0%).