Virus Angst Undermines Asia EM Currencies

Risk aversion triggered by concerns over a heavily mutated variant of the Covid-19 virus spreading across South Africa applied pressure to broader EM FX space. Hong Kong confirmed two cases of the new variant; one was an inbound traveller from South Africa, while the other was a person from an opposite room in a managed quarantine hotel.

• CNH: Spot USD/CNH edged higher but struggled to break out of yesterday's range. The yuan fixing fell virtually in line with sell-side estimate.
• KRW: Spot USD/KRW took out a layer of resistance located around the KRW1,191 figure. South Korea's daily Covid-19 cases stayed under 4,000 today, but critical cases hit a new record, with the gov't set to unveil measures to strengthen social distancing on Monday.
• IDR: The rupiah went offered in reaction to broader defensive feel, with spot USD/IDR hitting best levels in almost three weeks. Local headline flow was relatively light.
• MYR: Spot USD/MYR surged to its highest point since Jul 2020 and a recently completed double bottom formation may have exacerbated the ringgit's plight. Director-General of Health noted that Malaysia is monitoring the development of the new variant. Elsewhere, Malaysia's CPI accelerated to +2.9% Y/Y in October from +2.2% prior, narrowly beating median estimate of +2.8%.
• PHP: Risk-off flows and a reminder from BSP Gov Diokno that an RRR cut by the end of his term remains on the table sapped strength from the Philippine peso early on, but the currency trimmed some losses.
• THB: The baht led losses in Asia EM basket and is poised to register the largest weekly loss against the greenback among regional currencies. Local officials said they are monitoring risk from the new variant but are not changing border rules yet. Comments from Thailand's economic officials were seemingly overshadowed by the prospect of a disruption to the key tourism industry.