Forex - Asia Close Highlights

 08:45 (GMT) 10 Jan

  [Forex Highlights]

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Asia Close Highlights (0101-HBJT-C01)

10 January 2019

Regional Backdrop:

The Fed's dovish turn provided Asian currencies a boost, although INR (-0.09%) still saw to slight losses as oil prices continue to recover. Gains for all other FX, however, with the biggest winner being IDR (0.70%). CNY (0.41%), MYR (0.37%), PHP (0.36%), KRW (0.33%), CNH (0.29%), and THB (0.28%) all made relatively large gains as well. SGD (0.15%) and TWD (0.07%) rose slightly while HKD (0.00) was unchanged.

USD/CNH saw slight gains in the early Asia session above 6.8200, albeit temporarily. Pair fell sharply a few minutes after China's CPI and PPI release and was last seen trading in a narrow band around 6.8000. Both consumer prices and producer prices surprised on the downside, with respective year-on-year rates of 1.9% and 0.9%. Corresponding market estimates were 2.1% and 1.6%. The data release, however, is unlikely the root cause for pair's movements. Significant downside pressure is probably due to the dollar's weakness following the Fed's dovish turn and optimism on U.S-China trade talks. PBoC fixed its midpoint at 6.816 vs. previous close of 6.8175. USD/CNY opened relatively flat at 6.8170 and followed offshore spot trends with sharp losses to a 5-month low of 6.7842. Onshore spot is subject to similar factors too, namely, the dollar's weakness, trade developments, and China's growth prospects.

USD/SGD managed a successful break below the 1.3555 support in the prior session as dovish comments from Fed speakers and the FOMC saw to a weaker dollar. Current session sees downmove pausing at 1.3500/10. The true impact of further optimism over trade talks remains unclear, but concrete developments moving forward could provide pair with more momentum on the downside.

USD/IDR onshore spot gapped lower to open at 14055 on Thursday vs. previous close of 14125 on overnight Fed speakers hinting at a dovish turn in the Fed policy. Gains in the rupiah were however constrained by higher oil prices and still no further news on US-China trade talks, and pair rose to 14100 in early trading but a sharp slide in USD/CNY saw the pair return to sub-14050 levels in the afternoon.

USD/INR onshore spot opened firm at 70.4600 on Thursday and could not exhibit a strong downside momentum despite a dovish tilt in Fed commentaries and FOMC minutes the night before. Pair could only slip to lows of 70.3250 but gains above 70.50 also remained restrained until last look with a high seen at 70.6000 so far.

Market Psychology

USD/CNH - The next target is at the 6.7806 support, although China's cloudy growth prospects suggest that a break below would be difficult. For USD/CNY, the next support is at the 6.7800 figure, which will likely hold barring any surprises over trade.

USD/SGD - For now, we eye the 1.349 support, and a break below will welcome a stronger downside momentum.

USD/IDR - Clear threat to 14000 support is seen given the constructive outcome expectations from trade talks and a dovish Fed tilt, and a break below will risk the 13942 support.

USD/INR - We expect downside pressures to persist as external headwinds wane and any gains towards the 71 handle are likely to be sold off, while a drop below 69.50 will also remain unsustainable.

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