Forex - Indonesia Flows: Rupiah breaks 14000 on phase 1 trade deal


 02:51 (GMT) 13 Dec

  [Forex Flows]

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Indonesia Flows: Rupiah breaks 14000 on phase 1 trade deal (0101-PZMN-C01)

USD/IDR onshore spot saw a sharp slide lower on Friday to fresh 3-month lows of 13971 in early trading from previous close of 14033, breaking below the 1400 handle. The move was underpinned by risk-on sentiments in Asia driven by the signing of phase 1 trade deal between the US and China, as well as UK exit polls showing a Conservatives majority which should put the Jan 31 Brexit back on the table.

Pair broke below 14000 just as we had expected it would in case of a real trade deal. Support at 13970 held off a further slide for now, but we see risks as European/American traders come online. The storing support at 13890 may however hold for now until further details are released. 1M NDFs meanwhile traded slightly lower to 13974 lows this morning and was last seen trading around the 14000 handle. JKSE last seen up by over 0.6%.


Forex - Asia Open - Overnight Highlights


 23:46 (GMT) 11 Dec

 [Forex Highlights]

Asia Overnight Highlights - 12 Dec 2019

MAJORS

FX Highlights

The Bloomberg dollar spot index had a softer tone heading into the FOMC and a statement that contained few surprises did nothing to upset that. However, Fed Powell's comments that significant and persistent rise in inflation is needed for a rate hike extended the USD's losses.

Key event risks from UK elections and ECB meeting in the day ahead. President Trump also said he is likely to meet with top trade advisers on Thursday to discuss Dec 15 China tariffs, and the possibility of a phase 1 deal in 2019 now looks bleaker.

GBP recovered in Europe after Asia session losses following the narrower Conservative majority predicted by the latest YouGov MRP poll. Bookmakers shaved the odds of a hung parliament, but only slightly. GBP/USD moved back to near 1.32 and EUR/GBP back to near .84, ahead of the FOMC. After the FOMC, the EUR marginally outperformed the GBP.

EUR/USD made some gains in early US trade to near 1.11, though the main pre-FOMC movers were the commodity currencies, momentum extending as AUD/USD cleared .6850 and USD/CAD fell below 1.32 before the FOMC.

Data/Events Highlights:

- US Nov CPI +0.3% vs 0.2% exp, ex food/energy +0.2% as exp.

- FOMC left rates unchanged as exp, dots see steady policy in 2020, 25bps of tightening in 2021 and 2022.

- Fed's Powell said significant, persistent inflation rise needed for a rate hike.

- VIX index: 14.99 (-4.40%)

- Gold Spot: $1,474.65/oz (-0.01%)

- ICE Brent front contract: $63.72 ($-0.62)

- Nymex WTI front contract: $58.87 (+$0.11)

- Reuters/Jefferies Commodities Index: 181.49 (-0.37%)

- 10y UST: 1.791% (-5bp) (Asia morning)

- DJI: 27,911.30 (+0.11%); S&P: 3,141.63 (+0.29%); Nasdaq: 8,654.05 (+0.44%)

Data/Events Ahead:

US Nov PPI is due today and we expect gains of 0.2% overall and in the core rate ex food and energy, the latter a little less before rounding. Weekly initial claims are also due.

There should be confirmation that German November HICP inflation was 1.2% y/y.\

Japan's core machinery orders are likely to drop by 3% y/y in October.

Eurozone October industrial production is likely to rise by 0.2% m/m on the back of recent improvements in industrial survey data.

But the most important event of Thursday is the first press conference of Christine Lagarde as new President of the ECB. We expect no change to monetary policy but some hints into the direction of the strategy review.

UK elections will also be keenly watched.

EMERGING ASIA

FX Highlights:

Asian currencies were mixed against the dollar on Wednesday, as risk-off sentiments crept in amid trade uncertainty but a weaker USD was seen following the FOMC. KRW was the biggest loser, down 0.27% against the greenback. Meanwhile, PHP and IDR were down 0.24% and 0.18% respectively against the dollar. HKD and INR were the winners, up 0.24% and 0.12% respectively against the greenback and SGD (+0.08%) also chalked out some gains.

USD/CNH traded lower in the NY hours on Thursday, from 7.0400+ to lows of 7.0266 as Fed Powell's comments weighed on the USD strength. Pressure remains on the downside, and the pair may retest the support levels of 7.0087 and then the 7.0000 figure. USD/CNY onshore spot was range-bound, trading between 7.0348 and 7.0408 on Wednesday. The pair could move towards the support level of 7.0180 if positive progress in the US-China trade negotiation continues. 1Y NDFs also traded with a downside bias to lows of 7.1029 in the NY session from earlier highs of 7.1166.

USD/SGD was offered following the FOMC as Fed rate hikes were seen dependent on persistent and significant rise in inflation. Pair plummeted to fresh 1-month lows of 1.3571 in late NY trading hours from 1.3600 handle earlier in the day. Trade concerns however remain, and we expect pair to remain in a broad range of 1.3558 - 1.3636. Positive news on the trade front could bring the pair lower to the next support at 1.3558.

USD/IDR 1M NDFs saw gains to 14090+ levels earlier on Wednesday but most of these were pared back and prices returned to sub-14060 levels in NY following the less dovish FOMC tone. USD/IDR onshore spot traded with an upside bias on Wednesday after opening a notch lower at 14009 from previous close of 14020. Mixed signals about the Dec 15 China tariffs continue to unnerve investors, and event risks from FOMC/ECB/UK elections also kept investors cautious. Pair was last seen at 14045 into the close. The big 14000 figure support is in view, but we expect a firm break below only if a real trade deal is seen.

USD/INR 1M NDFs traded steadily lower on Wednesday, sliding from 71.100 to lows of 70.890. USD/INR onshore spot gapped a notch lower again to open at 70.890 on Wednesday from previous close of 70.9175 and extended the downside to fresh 5-week lows of 70.7425 amid corporate inflows. This comes despite fiscal slippage concerns and jitters about the US-China phase 1 trade deal, as reform hopes are likely underpinning. Pair however returned higher to trade to 70.900-levels in the afternoon. Nov CPI due today may take away the cheer from the rupee temporarily as it is likely to cross the 5% mark. Next support at 70.550 may be at risk but stronger support at 70.355 will hold amid continued economic challenges.

Data/Events Highlights:

No key data was reported in the emerging Asian economies on Wednesday.

Data/Events Ahead:

A busy calendar ahead in emerging Asia, starting with Malaysia's October industrial production at noon and Singapore's October retail sales thereafter.

Philippines policy rate announcement is also due later, and we do not expect a rate cut.

India's October IP and November CPI are due after the close of markets - and both are likely to raise concerns.

DATA RELEASES DUE TODAY

12-15th December: IN: Imports (Nov) 4cast: -11.5% y/y [Prev: -16.3]

12-15th December: IN: Exports (Nov) 4cast: -0.5% y/y [Prev: -1.1]

12-15th December: IN: Trade Balance (Nov) 4cast: -11.82USD bn [Mkt: -12300, Prev: -11.01]

00:01 GMT / 08:01 SGT - UK: RICS Housing Survey (Nov) [Mkt: -5, Prev: -5]

03:30 GMT / 11:30 SGT - TH: Consumer Confidence (Nov) [Prev: 70.7]

04:00 GMT / 12:00 SGT - MY: Industrial Production (Oct) 4cast: 0.5% y/y [Mkt: 2, Prev: 1.7]

05:00 GMT / 13:00 SGT - SG: Retail Sales (Oct) 4cast: -1% y/y [Mkt: -1.5, Prev: -2.2]

08:00 GMT / 16:00 SGT - PH: BSP - Overnight Reverse Repo Rate (Dec 12) 4cast: 4% [Mkt: 4, Prev: 4]

10:00 GMT / 18:00 SGT - EU: Industrial production (Oct) [Mkt: -2.4, Prev: -1.7]

11:45 GMT / 19:45 SGT - EU: ECB Main Refinancing Rate (Dec 12) 4cast: 0% [Mkt: 0, Prev: 0]

11:45 GMT / 19:45 SGT - EU: ECB Deposit Rate (Dec 12) 4cast: -0.5% [Mkt: -0.5, Prev: -0.5]

12:00 GMT / 20:00 SGT - IN: CPI (Nov) 4cast: 5.3% y/y [Mkt: 5.3, Prev: 4.62]

12:00 GMT / 20:00 SGT - IN: Industrial Production (Oct) 4cast: -4.5% y/y [Mkt: -5, Prev: -4.3]

13:30 GMT / 21:30 SGT - US: Initial Claims (Dec 7) 203 k [Mkt: 215, Prev: 203]

13:30 GMT / 21:30 SGT - US: PPI (ex Food & Energy) (Nov) 4cast: 0.2% m/m [Mkt: 0.2, Prev: 0.3]

13:30 GMT / 21:30 SGT - US: PPI (Nov) 4cast: 0.2% m/m [Mkt: 0.2, Prev: 0.4]

13:30 GMT / 21:30 SGT - CA: House Price Index (Oct) [Mkt: 0.1, Prev: 0.2]

21:30 GMT / 05:30 SGT - NZ: Business NZ Manufacturing PMI (Nov) [Prev: 52.6]

23:50 GMT / 07:50 SGT - JP: Tankan (Q4) [Mkt: 3, Prev: 5]

EVENTS & AUCTIONS

17:30 GMT / 01:30 SGT - CA: BoC's Poloz speaks in Toronto

18:00 GMT / 02:00 SGT - US: 30 year bond auction


Forex - Asia Open - Overnight Highlights


 23:54 (GMT) 10 Dec

 [Forex Highlights]

Asia Overnight Highlights - 11 Dec 2019

MAJORS

FX Highlights

The Bloomberg dollar spot index was generally lower on Tuesday amid contradicting reports on US tariffs on China that are scheduled to go in effect on Dec 15. Gains in EUR and GBP also weighed on the USD, although these were slightly reversed early this morning.

GBP was little affected by weaker than expected GDP data for October, and a larger than expected trade deficit was also ignored. A modest bounce in EUR/GBP failed to hold and GBP/USD eventually briefly cleared 1.32 on hopes of a Conservative majority in the Dec 12 polls. The latest YouGov poll in the morning however showed shrinking Conservative majority and GBP/USD dropped sharply to 1.3120.

USD/JPY, initially heavy, saw a spike up to 108.75 on a Dow Jones report that US and Chinese negotiators were planning for a delay of the scheduled tariff hike on December 15. The bounce was quickly erased but a gradual return to the highs later followed.

EUR/USD gained some support from a stronger than expected ZEW survey, which showed the strongest expectations index since February 2018, though only a modest rise in current conditions. Gains extended in North America, testing 1.10.

USD/CAD saw little response to the US, Canada and Mexico agreeing on a trade deal. AUD/CAD found support at .90 and AUD/USD found support at .68.

Data/Events Highlights:

- US Nov NFIB small business optimism rise to 104.7 from 102.4 vs 103.0 exp.

- US Q3 unit labor costs revised to 2.5% from 3.6% vs 3.4% exp, non-farm productivity revised to -0.2% from -0.3% vs -0.1% exp.

- UK monthly GDP showed no change in m/m terms in October, the third successive month in which the economy has failed to grow, albeit not as weak as the drop seen in September and August.

- In December, the ZEW survey of current economic conditions improved in Germany to -19.9 from -24.7 in November, and in the Eurozone (EZ) to -14.7 from -19.6 in November.

- VIX index: 15.68 (-1.13%)

- Gold Spot: $1,464.10/oz (-0.02%)

- ICE Brent front contract: $64.34 (+$0.09)

- Nymex WTI front contract: $59.08 ($-0.16)

- Reuters/Jefferies Commodities Index: 182.17 (+0.55%)

- 10y UST: 1.842% (+2bp) (Asia morning)

- DJI: 27,881.72 (-0.10%); S&P: 3,132.52 (-0.11%); Nasdaq: 8,616.18 (-0.07%)

Data/Events Ahead:

The FOMC meets today and we expect rates to be left unchanged with no major changes in tone to the statement. GDP forecasts should see little change but near term forecasts for inflation are likely to be revised lower. The dots are likely to look for steady policy through 2020 with marginal tightening in 2021 and 2022. Powell will deliver a press conference after the meeting.

US Nov CPI is also due today and we expect gains of 0.2% overall and in the core rate ex food and energy, the latter a little less before rounding.

EMERGING ASIA

FX Highlights:

Majority of the Asian currencies saw modest moves against the USD during Tuesday's Asian session as the 15 December U.S. tariff deadline loomed. INR extended its gains further for the week, up 0.17% against the dollar. PHP was up as well, by 0.13%. Meanwhile, KRW was the biggest loser, down 0.13% against the dollar amid funds outflow. Risk aversion is likely to set in as the focus remains on tariffs absent key data in Asia.

USD/CNH traded lower in the NY hours on Wednesday, from 7.0400 to lows of 7.0258 as initial reports suggested that further China tariffs would be delayed. Pressure remains on the downside, and the pair may retest the support levels of 7.0087 and then the 7.0000 figure. USD/CNY onshore spot was range-bound, trading between 7.0300 and 7.0421 on Tuesday. The pair could move towards the support level of 7.0180 if positive progress in the US-China trade negotiation continues. 1Y NDFs were last seen below 7.1050 in early trading on Wednesday after dropping from 7.1150 levels overnight.

USD/SGD was seen trading with a bearish bias on Tuesday in the NY hours, and printed lows of 1.3282 from near-1.3600 earlier. Eyes on the FOMC meeting where no rate change is expected, but commentary will be key. Possible trade developments prior to the 15 December tariff deadline will also continue to underpin. We expect pair to trade with a cautious undertone. Markets are optimistic that the December tariffs will not go through, if materialise pair may eye the 1.3558 support next.

USD/IDR 1M NDFs traded around 14025 on Tuesday night from a high of 14045 earlier in the day. USD/IDR onshore spot bounced up after hitting a 1-month low of 13990 Tuesday morning, and was last seen at 14020. Some cautiousness is likely to prevail in the markets ahead of key event risks this week, including upcoming Fed meeting and Dec 15 tariff deadline. Eyes on 14000 big figure and a lower support at 13970, we expect a firm break below only if a real trade deal is seen.

USD/INR 1M NDFs continued to trade with an offered tone to dip towards the 71 handle in Tuesday's NY session from 71.200+ at the start of the day. USD/INR onshore spot extended its losses further to at the beginning of Tuesday's Asian session and printed fresh over 1-month lows of 70.8475. Improved risk sentiment amid expectations of a US-China trade deal this week ahead of the Dec 15 tariffs and RBI's surprise hold from last week continue to underpin gains in the Rupee. Following the break below the 71 handle, attention now shifts to the 70.800 and 70.550 supports.

Data/Events Highlights:

China's headline CPI inflation climbed to an eight-year high of 4.5% y/y in November, largely caused by a further increase in food prices. Producer price index fell for a fifth successive month by 1.4% y/y amid continued weak domestic demand.

Philippines' exports rebounded by 0.1% y/y in October from -1.2% y/y prior, while imports continued to decline by 10.8% y/y. That saw trade deficit widened to USD 3250 mn in October.

Data/Events Ahead:

No key data is due to be reported in the emerging Asian economies on Wednesday.

DATA RELEASES DUE TODAY

23:50 GMT / 07:50 SGT - JP: PPI (Nov) [Mkt: 0.1, Prev: 1.1]

23:50 GMT / 07:50 SGT - JP: PPI (Nov) [Mkt: 0, Prev: -0.4]

13:30 GMT / 21:30 SGT - US: CPI (ex Food & Energy) (Nov) 4cast: 0.2% m/m [Mkt: 0.2, Prev: 0.2]

13:30 GMT / 21:30 SGT - US: CPI (Nov) 4cast: 0.2% m/m [Mkt: 0.2, Prev: 0.4]

19:00 GMT / 03:00 SGT - US: FOMC - Fed Funds Rate (Dec 11) 4cast: 1.75% [Mkt: 1.75, Prev: 1.75]

19:00 GMT / 03:00 SGT - US: Monthly Budget Statement (Nov) [Mkt: -206.2, Prev: -134.5]

21:45 GMT / 05:45 SGT - NZ: Food Prices (Nov) [Prev: -0.3]

23:50 GMT / 07:50 SGT - JP: Core Machine orders (Oct) 4cast: -3% y/y [Mkt: -1.9, Prev: 5.1]

EVENTS & AUCTIONS

No Key Events Scheduled


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