ASIA FX: USD/Asia Correlations Higher With CNH Than JPY, Particularly KRW & SGD

The table below presents levels correlations between USD/Asia pairs against USD/JPY and USD/CNH. The sample period is the last 3 months, so since early Nov last year. On average correlations are stronger with USD/CNH for most USD/Asia pairs relative to equivalent correlations with USD/JPY. This fits with only modest gains for some Asia currencies in the past week, despite the +2.4% gain in yen over this period. 

• Correlations are particularly stronger for KRW and SGD with CNH relative to JPY. KRW and SGD gains have been close to those of CNH this past week. There are mixed trends elsewhere, although for most currencies the correlation is stronger with CNH.
• If we short the sample period to the past month, the results are even more in favor of CNH over JPY. It is also true over the past 6 months, albeit with higher correlation scores for JPY in an aggregate sense.
• To the extent these correlations hold, they are worth keeping in mind given USD/CNH risks. In the near term the tariff outlook is key with China tariffs due to take effect from next Tuesday the 10th of Feb.
• Finally, USD/INR correlations remain very low with both JPY and CNH. USD/INR has broken higher under the new RBI Governor's regime, with this domestic backdrop having more influence than CNH or JPY shifts. 

  Table 1: USD/Asia Correlations - Past 3 Months