APAC EM FX

Hard to ignore USD bullish price action overnight after FOMC Vice Chair Dudley cementing Dr Yellen’s post-FOMC hawkish retort. Triggering dollar buying as US yields pushed higher.

But on the other hand, it’s equally as difficult to ignore the latest trends in US economic data which has been middling at best and present a clear and present danger about Fed policy normalisation running ahead of the curve. However, given the light US economic calendar, the dollar bulls should continue to enjoy the limelight on the hawkish Fed pivot

Locally much of the focus is squarely on China as the market viewed today’s CNY fix as the first real policy test for counter cycle fixing mechanism as dollar demand has significantly perked up and the CNH has been trading aggressively weaker this week.

In an attempt to keep investor sentiment buoyant nearing tonight’s MSCI decision the Pboc has been providing liquidity injections which have supported risk sentiment.

Given the hawkish Fed pivot, regional currencies weaker breaking above near term ranges reversing yesterday’s trend where good buying occurred in INR, KRW and TWD.

Price action, however, has been stable and more consolidative in nature as opposed to a trend reversal. The big picture remains intact with the overnight recovery in the US  tech sector setting the stage l for tech exporters such as KRW. And given the Feds are unlikely to move rates aggressively higher, the high yielder like the  INR remain favoured. The MYR is trading more USD sensitive this morning while picking up  little support from oil prices which continue to struggle. However, the broader more favourable narrative for Bond and Equity inflows to remain intact should ultimately lead the USDMYR lower again

The PHP is trading above the psychological 50.00 level as the market positions for Thursday rate decision , suggesting the BSP may stay the course

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