USD/Asia Pairs Mostly Lower, CNH & TWD Lag

USD/Asia pairs are mostly lower, albeit to varying degrees. The yuan and TWD have been laggards not moving much against the USD. THB, KRW and IDR have outperformed at the other end of the spectrum. Broader USD sentiment is mostly softer, amid a lower yield backdrop. Equity sentiment has been mixed. Markets still waiting for Third Plenum details in China, while a BBG story on potentially greater tech restrictions from the US has weighed this afternoon on South Korea and Taiwan. We still have the BI decision in Indonesia to come, but no change is expected. Outside of Malaysian trade figures, the data calendar is light tomorrow.

• USD/CNH sits slightly lower, last near 7.2860. We had a slight downtick in the USD/CNY fixing, but it remains above 7.1300. Much of the rhetoric from the US Republican National Convention remains centered on trade protectionism, while Trump gave wide ranging interview to BBG, where trade and tariff policy featured. Such risks along with some equity market softness is likely curbing yuan appetite.
• Spot USD/KRW last tracked near 1381, around 0.3% stronger in won terms for the session. We are slightly up from earlier lows, local equities weakened (Kospi off 0.60%), on BBG headlines around potentially greater tech restrictions from the US.
• USD/IDR sits close to session lows, last near 16130 (+0.30% firmer in IDR terms). The pair got to 16123 in the first part of trade, which was a fresh low back to late May in the pair. Levels wise we are sub the 20 and 50-day EMAs, with the 50 near 16200, while 100-day is closer to 16050. The rupiah is enjoying the benefits of positive spill over from lower US nominal and real Tsy yields (the 10yr back to 1.91%, lows form late March/early April). YTD correlations between the US real 10yr yield and USD/IDR (in levels terms) is 72%. Focus later will very much be on the BI outcome. No change is expected, with the BI still mind of FX stability and preferring to use other means to curb rupiah volatility. See our full preview here.
• USD/TWD spot sits a little lower, last near 32.61, little changed for the session. The pair remains within striking distance of recent highs (32.69 recorded on July 3). The pair is above all key EMAs, the 20-day near 32.48, is the closest support point. These trends leave TWD underperforming the generally softer USD/Asia bias elsewhere so far today. However, other North East Asia FX, like the CNY and JPY are seeing less positive trends at this stage. Local equities have moved off their recent highs, while July has seen decent equity outflows from offshore investors (-$2.7bn). The above tech headlines will be weighing at the margin as well.
• USD/THB has gapped lower, back to mid May levels in early Wednesday dealing. We were last at 35.90/95, around 0.45% firmer in THB terms. This puts us sub the 200-day EMA for the first time since March, although that breach of the support point proved to be very brief. The pair troughed around 35.365 at that juncture, while mid May lows were at 35.845, a potential near term downside target. Baht continues its recent outperformance trend, up 2.4% so far in July, (IDR is the next best in the region at +1.4%). YTD losses have been trimmed to 5%. Part of today's move will reflect catch up to softer USD trends post yesterday's onshore close. Broader cross asset swings have also been in THB's favor. US-TH 2yr yield spreads, are back at early Feb levels, +211bps. Down some 30bps since the start of the month. The gold price has also risen to fresh record highs, which may encourage more onshore selling/exports of the precious metal.