Yuan Support Aids Broader FX Sentiment

Lower USD/CNH levels, prompted by record CNY fixing support, and tighter liquidity, has helped stabilize broader USD/Asia sentiment. USD/CNH is back under 7.2550, while most NDF markets have either been steady or seen modest gains against the USD versus end NY levels on Wednesday. Equity sentiment has been mixed, but we are away from earlier lows, another modest USD headwind. Tomorrow, the focus will rest on the BoK and MAS decisions, although neither central bank is expected to shift policy.

• All eyes were on the USD/CNY fixing this morning. In the even it was only shifted a touch higher, while we saw a record fixing error back to 2018. USD/CNH fell but we couldn't breach sub 7.2500 on the downside. Onshore USD/CNY has tried to go higher, but at 7.2360 remains sub the daily trading limit. BBG noted state banks were selling USDs around 7.2350. This, along with tighter liquidity in CNH markets, were further supports for the yuan. Inflation data printed weaker than expected, with headline CPI back to 0.1% versus 0.4% forecast, raising fresh concerns around the extent of the demand recovery.
• 1 month USD/KRW has remained below intra-session highs from Wednesday (post the US CPI print), with the pair near 1361 in recent dealings. Spot is above 1360 though, which is fresh highs in the pair back to late 2022. Equities opened weaker post yesterday's parliamentary election loss for President Yoon's ruling part, but dip buyers emerged particularly in the chip space. Early trade data trends for April look positive from an export growth standpoint.
• Earlier the Philippines Trade Balance narrowed, while the unemployment rate dropped to 3.5% y/y from 4.5% y/y in Jan. USD/PHP sits down modestly, last near 56.43. ADB believes that the country's broader fiscal deficit outlook until 2028 remains acceptable if government spending prioritizes infrastructure and social services, and efforts to improve tax efficiency match increased expenditure.
• USD/THB spiked higher in early trade, as catch up to the stronger USD post yesterday's onshore close. We got to 36.75, but sit back near 36.60 in recent dealings. PM Srettha has continued to press for easier policy settings, even if that means a weaker baht. This comes after yesterday's on hold BoT outcome (policy rate at 2.50%).