Won Leads Gains After BoK Flags FX Concerns, Rupiah & Ringgit Falter

The Bloomberg/J.P. Morgan Asia Dollar Index (ADXY) hovered near cyclical lows as cautious mood remained amid familiar concerns surrounding global growth prospects. The Asia EM space got some reprieve as we approached the Asia/Europe crossover, with the USD erasing its earlier gains on the back of an FT source report suggesting that the Bank of England has privately communicated to bankers that it could extend its emergency bond-buying scheme past this Friday's deadline.

• USD/CNH ground higher in early trade, ignoring the 30th consecutive firmer-than-expected yuan fixing, with the divergence from sell-side expectations widening to ~650bp. Participants scrutinised the PBOC's statement from yesterday, where officials said "the yuan will achieve equilibrium by itself as supply and demand plays a decisive role." The late-doors dip in the greenback drove USD/CNH into negative territory.
• The South Korean won outperformed its peers in emerging Asia. Spot USD/KRW dipped as BoK Gov Rhee said FX developments were one of the main reasons for the central bank's decision to raise the key policy rate by the expected 50bp increment today. Worth noting that there were two dovish dissenters, which makes it the first split vote since August 2021.
• The currencies of top palm oil exporters (IDR and MYR) were among the worst performers in the region, even as the tropical oil clawed back some of its yesterday's losses. Weakness in the broader commodity complex may have weighed on those currencies. Separately, Indonesian FinMin Indrawati warned of a "hurricane" of risks facing EMs.
• Spot USD/PHP kept testing record highs. The Bankers Association of the Philippines issued a statement, where lenders vowed to cooperate with Bangko Sentral ng Pilipinas in curbing speculation in the FX market.
• Spot USD/THB trimmed its initial gains as Thailand's consumer confidence climbed to an 8-month high. The minutes from the BoT's September monetary policy meeting flagged elevated risks to the inflation outlook.