Weaker PPI Inflation Curbs CNH Rebound, KRW Still Outperforming

Weaker, on balance, China inflation data has weighed on the CNH, although we remain within recent ranges. This week's property equity rebound has lost some momentum as well today. KRW continues to outperform, while INR, PHP and MYR are also stronger against the USD. SGD has lagged somewhat. Next Monday the main focus will be May CPI out for India (Apr IP also prints), while we are still waiting for China May aggregate/new loans data.

• Early lows in USD/CNH sub 7.1170 were supported. We eventually got back close to 7.1380, as inflation data showed weaker than expected factory gate inflation, while CPI was as expected but the detail remained fairly soft. China onshore equities are around flat, with property sub indices giving back some gains from recent sessions. 2yr government bond yields have ticked down slightly, while the 10yr remains close to 2.70%.
• 1 month USD/KRW has tracked to fresh lows, hitting 1292, before some support emerged. The pair last tracked just above 1293. A rebound in USD/CNH has weighed on won at the margins, still the won is the second best performer in Asian FX over the past week, slightly shaded by IDR. Onshore equities have rebounded today, the Kospi to fresh highs near 2640. Offshore investors have bought $278.1mn of local equities today, but we are still down slightly for the week in terms of net flows.
• In Malaysia April Industrial Production printed at -3.3%, well below the estimated +2.0% gain, this was the lowest print for the measure since July 2021. We are well off the heady levels of Q3 last year, above 13% y/y. Weakness was broad based, with manufacturing IP m/m slumping -11.4%. Manufacturing Sales Value fell 2.0% in Apr down from the prior read of 8.0%. There has been little reaction in USD/MYR prints at 4.6110/30 unchanged from prior to the print.
• The Rupee has open dealing ~0.1% firmer, the pair last prints at 82.45/48. The lingering impact of yesterday's RBI meeting where the bank maintained its pause on rate and stance but stressed that the 4% inflation target needs to be met sees the INR outperform in the USD/Asia space. Local banks stepped up government bond purchases yesterday buying a net $1.03bn which was the largest single day purchase since May 4 2022. Looking ahead, May CPI print on Monday headlines next week's data calendar, inflation is expected to tick lower to 4.40% from 4.70% prior.
• USD/PHP currently tracks close to 56.00/05, down -0.15% from yesterday's closing levels (56.12). This is line with a softer tone more broadly, although PHP's beta is fairly low to such moves. Moves above the 200-day MA, around 56.13, continue to draw selling interest. Recent lows came in around 55.85, earlier in June. We haven't seen any adverse FX reaction to the RRR cut announced late yesterday. BSP stressed the move didn't shift the monetary stance. Apr trade figures showed much weaker than expected export and import growth. Export growth fell to -20.2% y/y (-9.0% forecast), lows back mid 2020. Import growth was -17.7% y/y, also back to H2 2020 lows. The trade deficit was slightly better than expected, printing at -$4.531bn. We are up from 2022 lows on this metric, but the improvement is stop-start, as weaker export growth offsets a lower energy bill.
• The SGD NEER (per Goldman Sachs estimates) is firmer this morning, the measure printed its highest level since 22 March yesterday and we remain just below the top of recent ranges. We now sit ~0.6% below the upper end of the band. USD/SGD is a touch higher in early trade today paring some of yesterday's losses. Broader greenback trends saw USD/SGD fall ~0.5% on Friday. Looking ahead, the local data calendar is empty until next Friday when May Export data crosses.
• USD/THB is tracking lower, last near 34.60/35, around 0.60% firmer in baht terms versus yesterday's close. We remain broadly within recent ranges though. Onshore equities have given back part of yesterday's strong bounce.