Forex - Asia Close Highlights

 08:54 (GMT) 09 Jan

  [Forex Highlights]

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Asia Close Highlights (0101-HBFG-C01)

09 January 2019

Regional Backdrop:

Gains in most Asia FX on cautious optimism over U.S-China trade developments. Biggest gains in CNH (0.32%) and CNY (0.28%), followed by PHP (0.18%), THB (0.16%), KRW (0.15%), SGD (0.14%), TWD (0.12%), MYR (0.11%), and IDR (0.06%). INR (-0.28%) the only currency that fell, partially due to prior session's oil price rally.

USD/CNH experienced a sharp decline in the early Asia session below 6.8450 as the yuan benefited from slight optimism on trade. Losses are likely to be pared back a little in the intraday session as markets continue to evaluate ongoing trade developments. PBoC fixed its midpoint at 6.8526 vs. prior close of 6.8548. USD/CNY opened relatively flat at 6.8440 with temporary losses to a 5-week low of 6.8340. This was, however, short-lived with pair last seen trading near its open. Area below the 6.8310 support remains difficult territory especially with uncertainty surrounding China's growth prospects and ongoing trade developments. Positive and concrete developments on trade could provide pair further momentum on the downside, but we do not see this taking place in the short run.

USD/SGD saw prior session's bounce from 1.3555 capped at 1.3595 and continued consolidating into Wednesday's early Asia session. Prices seem to be reflecting the cautious stance adopted by markets towards U.S-China trade, and the lack of any news surprises is keeping volatility at a minimum. The FOMC's meeting minutes Thursday will be the next key event to watch. We expect a generally positive tone, which suggests that pair could see some upside bias then.

USD/IDR onshore spot gapped lower to open at 14110 on Wednesday vs. previous close of 14148 and printed lows of 14094 in early trading. Rupiah gains however remained in check and pair rose to 14178 high, as no further news on trade talks dampened market sentiment despite President Trump's keenness. Bank Indonesia intervened in the DNDF market in the afternoon and pair dropped back to sub-14150 levels at last look.

USD/INR onshore spot gapped lower to open at 70.0500 on Wednesday after previous close of 70.2000 but remained supported above the key 70 handle. Pair was then boosted to fresh highs of 70.4000+ as higher oil prices underpinned, testing the resistance at 70.50 but not breaking through until last look. Domestic fiscal concerns are also weighing on the rupee.

Market Psychology

USD/CNH - We expect pair to trade within 6.8249-6.8685 in the short run, but further optimism on trade could threaten the former support. For USD/CNY, we expect consolidation to continue within a range of 6.8310-6.8540.

USD/SGD - For now, pair will likely continue consolidating between 1.3555-1.3601, but further optimism on trade could threaten the former.

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

USD/INR - We expect downside pressures to persist as external headwinds wane. Risk to 70.50 has increased, but we expect any gains above to remain shallow.

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