Forex - Asia Close Highlights

 08:50 (GMT) 12 Feb

  [Forex Highlights]

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Asia Close Highlights (0101-HVGF-C01)

12 February 2019

Regional Backdrop:

The Asian markets continued to wait for the US-China trade talk news, although stocks advanced on Tuesday as another US government shutdown was avoided. INR led the gains against the USD, up 0.53%, as the January inflation data was eyed. The Chinese yuan was also stronger after the drop on Monday. Singapore's December retail sales and Philippines' December exports disappointed, but both currencies recovered their knee-jerk losses.

USD/CNH saw a modest downmove from the 6.8000 handle to 6.7873 last. Pair likely moved by news that U.S. is finalising a deal on government funding and avoiding another shutdown. PBoC fixed mid-point at 6.7765 vs previous close of 6.7920. USD/CNY remains range bound with a modest crawl down to 6.7765. CNY/CNH gap more than 1 big figure. 1Y NDFs saw a move southwards to 6.8081 last.

USD/SGD saw a gradual decline during the Tuesday's Asian session, after failing to break above Monday's high at 1.3614. Pair is currently trading at an intra-day low at 1.3584. Singapore's retail sales saw a 6% y/y decline in December, worse than the 2.4% y/y decline in November. Pair attempted to break the 1.3600 level after the release, but strong resistance reverted the pair back on its downtrend for the day.

USD/IDR onshore spot gapped higher to open at 14085 on Tuesday after a bid tone in the USD the night before from a weaker GBP and trade talk concerns. Pair attempted a break above 14100 in early trading, but possible BI presence stalled the advance and a high of 14095 was seen before the pair turned lower to inch back to 14040 at last look. Investors are turning jittery about the upcoming US-China trade talks, with risks of these getting worse rather than better, which is prompting some risk averse trading. Indonesia's weak current account also keeps rupiah vulnerable.

USD/INR onshore spot opened barely changed at 71.1725 on Tuesday from previous close of 71.1650 despite the upside pressures from a stronger USD the night before. Pair defied the regional trend of generally weaker currencies and slid to 71.0200, as lower oil prices underpinned.

Market Psychology

USD/CNH - Any moves beyond the 6.7495-6.8000 range should signal at further momentum downwards/upwards. Recent positive tone towards trade should keep USD/CNY below the psychological resistance of 6.8000.

USD/SGD - Eyes are on the 1.3545 support, if the downward pressure persists. But only a dip below the support, will signal a reversal. Otherwise, we expect the upward momentum to continue, with the pair trading between 1.3545-1.3615.

USD/IDR - Pair is likely to drift back below the key 14000 if January trade data at the end of the week shows some improvement.

USD/INR - Break of strong support at 70.855 is accelerating the downside momentum, but we see no risk to the next support at 70.3200.

Forex - India Preview: due 12-Feb - January CPI to remain near recent lows

 01:00 (GMT) 08 Feb

 [Economic Data]

India's January inflation print is scheduled for release after the close of markets on 12th February, and we expect CPI to remain near recent lows to come in at 2.25% y/y vs. 2.19% y/y in the preceding month. Food prices continued to weigh on headline inflation, although a lower base may help to offset some of the pressures. The rupee also remained weak against the USD in January, compared to gains in most of the other Asian currencies, which possibly lifted some of the pressure.

We expect a further recovery in headline inflation in the coming months, but it should continue to remain soft. Some inflationary impact is also seen from the populist budget announcement on Feb 1st. The central bank however delivered a surprise rate cut at the February meeting due to the persistent low inflation, and the March quarter inflation is expected to average around 2.8% y/y.

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