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USD/CNH Breaches 7.00, KRW & TWD Outperform, But SEA FX Weaker

ASIA FX

Much of the focus today has been on the breach of 7.00 in USD/CNH. It came not long after the in line CNY fixing. This has weighed on FX sentiment elsewhere in the region, although KRW and TWD have outperformed thanks to resilient local equities. SEA FX is mostly weaker, led by THB on continued election jitters, Tomorrow, the BSP decision is due in the Philippines, with no change expected.

  • USD/CNH is continuing to track higher this afternoon, currently around session highs of 7.0130. We aren't too far away from late Dec highs in 2022 of 7.0156. The neutral CNY fixing was the green light for further depreciation pressures, while onshore USD/CNY spot gapped higher as well, although it hasn't breached the 7.00 handle at the time of writing. CNY daily option volumes on Wednesday are currently around 4 times their usual volume at this stage of the session. ~$3.5bn in USD/CNY options have been dealt today according to the latest DTCC data, ~$0.8bn is the average volume for this stage in the session.
  • 1 month USD/KRW has spent the session mostly below 1340 and sits at 1337 currently, around -0.30% sub NY closing levels. Onshore equities are higher by 0.6%, as tech has outperformed. This has helped offset the weaker CNH impact. USD/TWD is steady around the 30.80 level, also benefiting from stronger equities, the Taiex +1.8% at this stage. Offshore investors have been buying stocks from both bourses over recent sessions. Today offshore investors have purchased a further $229.9mn of South Korea shares.
  • USD/THB continues to track higher, the pair last near 34.20. This is 0.70% weaker in baht terms versus yesterday's close. Technically, we are above the 20 and 50-day EMAs (34.036 and 34.17 respectively). The 200-day EMA sits just under 34.40, and we haven't been above this level since the first half of March. A firmer USD backdrop and higher USD/CNH levels are weighing, but so too is election uncertainty. Move Forward still needs to gain support of the Senate, with its PM candidate not drawing a uniformly positive response at this stage.
  • The SGD NEER (per Goldman Sachs estimates) is firmer this morning, however we remain within recent ranges. We now sit ~0.9% below the upper end of the band. USD/SGD printed its highest level since 20 March today, the pair is ~0.1% firmer and last prints at $1.3415/20. April Export Data was firmer than estimates on the M/M printing at 2.7% vs -3.1% exp. The Y/Y print was a touch softer than expected at -9.8% vs -9.7% exp.
  • Elsewhere in SEA, USD/MYR has risen around 0.50%, last tracking above 4.5220, while USD/IDR is also higher, last around 14875. USD/PHP dips have been supported, back towards 56.00, the pair last near 56.25. The BSP is expected to be on hold tomorrow.

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