Forex - Indonesia Flows: BI guards rupiah amid global risk aversion

 02:30 (GMT) 26 Aug

  [Forex Flows]

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Indonesia Flows: BI guards rupiah amid global risk aversion (0101-NMHL-C01)

USD/IDR onshore spot traded with a bid tone at the start of the new week, trading to highs of 14270 in early trading, as trade war escalation on Friday saw risk aversion come into play again. Calls for Fed easing are picking after Trump's repeated pressure and global growth concerns amid the trade war escalations, which may prompt calls for BI easing as well. Strong vigil on the pair may prevent a test of the 14360 resistance but buyers are seen below 14200. 1M NDFs meanwhile traded in consolidation around 14350 this morning after a rally from sub-14300 levels in Friday's NY session. JKSE last seen down by over 1%.

Forex - Asia Open - Overnight Highlights

 23:54 (GMT) 25 Aug

 [Forex Highlights]

Asia Overnight Highlights - 26 Aug 2019


FX Highlights:

The Bloomberg dollar spot index traded heavily in Friday's after Powell's comments as he highlighted global risks and said the Fed would act as appropriate - seen as code for locking in a September cut.

China announced retaliatory tariffs on U.S. products and Trump announced further retaliatory measures to that, escalating trade war concerns. Risk aversion saw a pick up in early Asian hours as a result. There were further erratic remarks over the weekend.

USD/JPY slid below 105 to YTD lows of 104.46. AUD/JPY was sold off to lows of 69.967 in early Asian hours this morning.

EUR/USD rose to 1.1140+ levels on USD weakness. GBP saw some mild correction to the euro after Thursday's recovery, as markets remained unconvinced that Johnson's meetings with Merkel and Macron changed anything substantive on the Brexit issue. Anti-EU MPs also created some doubt that any deal would get through the House of Commons by indicating that a removal of the backstop would not be enough to convince them to vote for a deal.

Data/Events Highlights:

- China announces retaliatory tariffs of $75 billion worth of U.S. goods to take effect on Sept 1 and Dec 15

- Trump vows to respond to China's tariff retaliation. Adds we don't need China and frankly would be far better off without them'. US companies ordered to find alternatives to China including bringing companies home

- Powell - economy in a favourable place close to Fed goals. 3 weeks since the last meeting have been 'eventful' with new tariffs, more evidence of global slowdown and geopolitical risks like hard Brexit

- Fed's Bullard: -50bp will be robustly debated in Sep; inverted yield curve, global slowdown, moving inflation to target faster cited as reasons to ease

- Fed's Mester - would say leaves rates were are, but very attuned to downside risks

- Fed's Kaplan - do not see this as a rate cutting cycle. Monetary policy not causing slowdown, yield curve
- US Jul New Home Sales 635k from sharply upward revised 728k

- UK's Johnson - deal not going to be a cinch, people 'shouldn't hold their breath'.

- VIX index: 19.87 (+19.12%)

- Gold Spot: $1,546.77/oz (+1.30%)

- ICE Brent front contract: $58.46 ($-0.88)

- Nymex WTI front contract: $53.16 ($-1.01)

- Reuters/Jefferies Commodities Index: 168.61 (-1.00%)

- 10y UST: 1.535% (-8bp) (Asia morning)

- DJI: 25,628.90 (-2.37%); S&P: 2,847.11 (-2.59%); Nasdaq: 7,751.77 (-3.00%)

Data/Events Ahead:

In the U.S., we expect a 1.5% increase in Jul durable goods orders but a 0.2% decline ex transport.

In Germany, we envisage some consolidation in the headline and component parts of the Ifo survey in the upcoming August numbers. Indeed, the headline is seen rising 0.3 point to 96.0, this making little inroad into the 1.8-point slump witnessed in July, that being the largest in a four-month run of declines that pulled the overall figure to the lowest since 2014.


FX Highlights:

Asian currencies posted mixed performances on Friday. CNH (-0.59%) led the losses by a wide margin on escalation of trade war late into Friday, while KRW (-0.27%), CNY (-0.17%) and SGD (-0.11%) also remained weak. THB (+0.27%), INR (+0.21%) and IDR (+0.14%) were however seen in gains against the USD.

USD/CNH rose to fresh highs at 7.1926 earlier on Monday after closing the NY session at 7.1315 on Trump's retaliatory measures in the trade war. Eyes now on the psychological 7.2000. USD/CNY closed Friday near record highs of 7.0992 and will likely surge further to 7.1500+ levels at the open on Monday. 1Y NDFs broke above 7.2000 into the close on Friday and extended gains to 7.2512 early this morning.

USD/SGD remained resilient on Friday despite US/China escalations, closing the NY session at 1.3868 but surged early this morning to 1.3900+ handle printing over 2-year highs of 1.3925. Break of key 1.3900 handle brings our attention to 1.3950 but we wait for further trade announcements.

USD/IDR 1M NDFs saw gains to 14350+ in Friday's NY session following Trump's actions on China spelling a bout of risk aversion. Onshore spot traded heavily on Friday, slipping towards 14200 from 14240-levels earlier in the day. Pair may target the 14360 resistance in the week ahead as risk aversion jumps on trade war escalation.

USD/INR 1M NDFs defied market trends to move downwards on Friday to sub-72 levels as FinMin announced a slew of measures to support the economy. Onshore spot printed YTD highs of 72.0475 earlier on Friday but retreated lower to 71.700-levels as reports of fiscal measures started coming in. Upside bias is likely to be intact given tough external conditions, but a break of 72.050 resistance is needed to put the focus on 72.200.

Data/Events Highlights:

Singapore's inflation came in below expectations, at 0.4% y/y in July from 0.6% in June. This was weighed down by core inflation which was only 0.8% y/y.

Data/Events Ahead:

Singapore's July industrial production is expected to remain in negative territory.

HK's July trade balance is also due.


05:00 GMT / 13:00 SGT - JP: Leading Indicator (June F) [Prev: 93.3]

05:00 GMT / 13:00 SGT - SG: Industrial Production (sa) (Jul) [Mkt: -2.8, Prev: 1.2]

05:00 GMT / 13:00 SGT - SG: Industrial Production (Jul) 4cast: -4.4 % y/y [Mkt: -5.6, Prev: -6.9]

08:30 GMT / 16:30 SGT - HK: Imports (Jul) [Prev: -7.5]

08:30 GMT / 16:30 SGT - HK: Exports (Jul) [Prev: -9]

08:30 GMT / 16:30 SGT - HK: Trade Balance (Jul) [Prev: -55.2]

12:30 GMT / 20:30 SGT - US: Durable Ex Transportation (Jul P) 4cast: -0.2 [Mkt: 0.1, Prev: 1]

12:30 GMT / 20:30 SGT - US: Durable Goods Orders (Jul P) 4cast: 1.5 [Mkt: 1.1, Prev: 1.9]


No key events scheduled

Forex - Asia Close Highlights

 08:46 (GMT) 22 Aug

 [Forex Highlights]

22 August 2019

Regional Backdrop:

Most Asian currencies were slightly weaker on Thursday. The key focus will still be on Fed Chair Powell Speech's on Friday, which markets will scrutinize for clues of Fed's next policy move. Bank Indonesia (BI) announced a second consecutive cut of 25bps in its policy rate at the August meeting to lift GDP growth, IDR was in mild gains of 0.1% against the dollar. South Korean Won pared some earlier gains, and was down by 0.41% against USD. That was followed by CNH (-0.23%), CNY (-0.22%), INR (-0.20%) and SGD (-0.10%). Other currencies including PHP, HKD, THB, TWD and MYR were quite stable.

USD/CNH has continued on a bid tone since the NY session. This is despite Fed minutes arguing for aggressive easing. Pair was last up to as high as 7.845. PBoC fixed mid-point at 7.0490 vs. previous close of 7.0633. This still signalled at some support for currency despite higher than previous days. USD/CNY gapped higher and gradually rose, last at 7.758. 1Y NDF last at 7.1477.

USD/SGD rebounded from 1.3825 to print an intra-day high at 1.3861, before paring gains to 1.3848 towards the end of Thursday's Asian session. The release of the FOMC minutes was a non-event and reactions were relatively muted. Attention now shifts to Friday's Jackson Hole Symposium, where markets await further guidance from the Fed.

USD/IDR onshore spot remained close to the 14240 levels on Thursday after a drop earlier on Wednesday from 14270+ levels. Traders remained on the sidelines ahead of the BI decision and a surprise cut saw the pair drop to intraday lows of 14228 as prudent policy stance was ensured.

USD/INR onshore spot traded higher to 71.700 levels in early trading on Thursday from previous close of 71.560. The RBI minutes from the July meeting showed a dovish bent with Governor calling for further growth support. The 71.800 resistance was tested again in the afternoon but no break seen until last check. Focus is now on Fed Chair Powell's speech on Friday and the G7 meetings.

Market Psychology

USD/CNH - 7.1124 resistance is still far although possible to reach in the coming days. A move below 7.0411 support may result in some profit taking. Attention is now at psychological 7.1000 big figure resistance given recent trends.

USD/SGD - We expect pair to edge lower and eye the 1.3806 support next. If broken, will turn our attention to the 1.3795 support.

USD/IDR - Pair is unlikely to target the 14360 resistance but buyers below 14200 will likely keep the pair range bound.

USD/INR - Upside bias is likely to be intact, and expect a break of the 71.800 resistance to turn the focus to the 72 handle.

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