USD/CNH Hits Fresh Highs Before Retracing, Won Outperforms

Most USD/Asia pairs haven't been able to rally today, which goes against the trend seen for the majors. USD/CNH got to fresh highs but is slightly lower now, headlines dominated by regulator speeches in Shanghai today. KRW has outperformed at the margins, while MYR and THB have underperformed. Tomorrow, May inflation data in on tap for China, which will be the main focus point. Philippines trade figures are also due and Malaysia IP as well.

• China SAFE Head Pan Gongsheng has spoken at the Lujiazui forum in Shanghai. Comments came across as quite relaxed around the current FX backdrop that China faces. Pan stated that the FX rate is basically stable and that the market is functioning normally. He added that USD strength is unsustainable as the Fed hiking cycle nears an end. He said it was likely the US economy was likely facing a recession and that this would support the yuan. Pan reiterated the authorities have increasingly amply forex policy tools. Pan's comments hint the China authorities are looking to ride out this wave of USD strength. USD/CNH sits slightly below the 7.1500 handle, unchanged for the session so far.
• 1 month USD/KRW sits modestly below NY closing levels, last just under 1303.50. This is slightly outperforming steady CNH trends, although higher beta majors are firmer against the USD (A$ and NZD), while USD/JPY is lower, which may also be helping at the margins. Spot is above yesterday's closing levels, but not by much, last in the 1305/06 region.We have heard commentary from FinMin Choo. He stated growth may be weaker than expected and that the 1.6% 2023 GDP forecast may need to be nudged down. For the FX though, the trade deficit is expected to improve further in June and that FX volatility has eased of late. The authorities also haven't decided whether power prices will rise in Q3, but Choo stated June CPI could fall to the 2% level. BoK Deputy Governor Lee Sang-hyeong also spoke and stated the tightening cycle is not over yet, and it is too early to relax about inflation, per Reuters reports.
• The RBI has left its Repo Rate unchanged at 6.50% today there was a unanimous decision in holding rates steady. Governor Das has said that the bank remains focused on withdrawing accommodation, 5 out of 6 members voted for the stance decision. The rupee had a muted reaction to the RBI's decision holding steady in a narrow range thus far. USD/INR last prints at 82.57/59, little changed from opening levels. 10 Year Bond Yields are up ~3bps rising to an intra-day high of 7.01%. In the domestic equity market the Nifty is edging higher from pre-RBI levels.
• USD/MYR is ~0.5% firmer this morning, the pair is dealing above the 4.60 handle last printing at 4.6170/90. The pair continues to see-saw around the 4.60 handle, and has been unable to sustain a break of the handle this week. A short time ago BNM Deputy Gov Fraziali noted that Malaysia is not entering recession, reaffirming the 2023 inflation forecast. Fraziali also said that the BNM is slightly accommodative and they don't see inflation "misbehaving". Earlier today Bank Negara Malaysia Gov. Shamsiah Yunus noted this morning that receding cost pressures are not feeding through to product prices as demand remains high. She also noted that the central bank's role is to ensure that the value of the currency doesn't swing too fast or too much.
• The SGD NEER (per Goldman Sachs estimates) is firmer this morning, the measure printed its highest level since 22 March this morning. We now sit ~0.6% below the upper end of the band. USD/SGD is a touch lower in early trade today, however ranges have been narrow thus far with broader USD/Asia flows dominating recent dealing. Singapore's Foreign Reserves rose to $325.7bn in May which is the highest in a year, increasing by 13.7bn from a month earlier. The local docket is empty for the remainder of the week.
• THAILAND: The alliance of 8 political parties expected to form a new government is hoping to bring forward the formation by 2-3 weeks if the Election Commission speeds up the endorsement of MPs-elect, according to the Bangkok Post. There were further coalition talks held on Wednesday and all parties are scheduled to meet again on June 20. The group have already begun to work on certain issues. USD/THB has tracked higher today, the pair last close to 34.90.