Yen Gains, Positive Equities Help Fuel Asia FX

USD/Asia pairs are seeing early downside, with MYR and THB the standouts. Part of this is reflective of USD weakness post the onshore spot closes yesterday. The combination of the Fed, with Chair Powell putting a September cut on the table, and further yen gains were the standouts. US real 10yr yields hit multi month lows in Wednesday US trade.

• Still, further downside in USD/JPY so far today, with yen 0.50% stronger, is providing fresh impetus. As we highlighter earlier in the week, all of Asia FX (except INR) have had a positive correlation with yen moves in 2024 to date.
• The equity backdrop is also positive (outside of Japan markets). Oil price will be a watch point given Middle East tensions (as Iran threatens to strike Israel) but trends in oil haven't been dramatic so far in Thursday trade.
• USD/CNH, is back to 7.2175, around 0.15% firmer. We have the CNY fixing coming up, then the Caixin PMI. July 25 lows of 7.2032 will be in focus.
• Spot USD/KRW is near 1368.55, close to Wednesday intra-session lows. Earlier export data was a bit below expectations.
• USD/MYR is sub 4.5700, fresh lows back to August last year. Outside of the above positives, repatriation of offshore investment flows remains a domestic focus point. The pair is in oversold territory. Late July lows in the pair from 2023 were at 4.5070.
• USD/THB is sub 35.50, fresh lows in the pair back to March of this year. We are also oversold for this pair, but not to the same degree as USD/MYR.