Asia FX: Strong exports support selective outperformance – MUFG

FXStreet Insights Team FXStreet

MUFG’s Senior Currency Analyst Michael Wan notes that Asian currencies have benefited from a weaker US Dollar (USD) following the Iran conflict, but stresses growing dispersion across the region. The bank maintains a preference for Chinese Yuan (CNY) and Malaysian Ringgit (MYR) over Indian Rupee (INR), Vietnamese Dong (VND) and Philippine Peso (PHP). Strong export momentum, driven by Artificial Intelligence (AI) and technology demand, underpins Asia’s starting position despite global risks.

Asia FX divergence on Dollar weakness

"It’s also important to remember the starting point of our region and each country. And the starting point is that Asia entered into this conflict with very strong export momentum helped by the continued acceleration in the AI and technology boom. The early export reporters across our region such as Taiwan, South Korea, and Vietnam have seen a meaningful pick-up in the pace of export momentum especially in March, while in China’s case even though year-on-year changes in exports moderated meaningfully we think this was due more to seasonal timings rather than a slowdown."

"South Korea also just released export price data showing a sharp 28%yoy rise for March and likely reflecting a strong acceleration in DRAM prices."

"From a financial market perspective, it’s amazing how much has retracted in terms of the negative hit to risk sentiment post the Iran conflict, and in particular the US Dollar has also pretty much weakened beyond the pre-conflict levels as we speak. Asian currencies have also been helped by the weaker Dollar trend but over in our region we note greater dispersion in outcomes across currencies. Our existing currency preference favouring the likes of CNY and MYR, and seeing underperformance in the likes of INR, VND and PHP continues to play out, even as the exact FX levels will be dependent on global factors as well."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD flatlines near 0.6965 as less hawkish RBA counters USD weakness

AUD/USD holds steady above a two-week low, trading near 0.6965 in the Asian session on Wednesday as early midterm election results heighten political uncertainty and weigh heavily on the US Dollar. Moreover, reviving safe-haven demand triggers a fresh leg down in US bond yields, offsetting Fed hike bets and exerting additional pressure on the buck. However, a less hawkish RBA caps the Aussie.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold continues scaling new weekly highs; eyes $4,050 as US sticks to elections-led losses

Gold builds on its strong intraday move up, hitting a series of new weekly tops, and climbing back close to the $4,050 level during the first half of the European session amid a broadly weaker US Dollar. Democrats’ wins in the House and Senate raise the prospect of gridlock in Washington. Moreover, heightened political uncertainty drove investors to safe-haven assets, exerting some downward pressure on US bond yields. This is seen weighing on the Greenback and supporting the precious metal.

Crypto Today: Bitcoin, Ethereum, XRP extend advance as US Dollar slides on Democrats' US midterm victory

Bitcoin trades above $78,000 on Wednesday as risk-on sentiment improves in the broader cryptocurrency market. Ethereum mirrors BTC’s recovery outlook, hovering above $2,300. Ripple similarly exchanges hands above $1.28, marking two consecutive days of gains.

ADP Employment Report expected to show slower job growth in October

The Automatic Data Processing Research Institute is due to release October’s private-sector employment report on Wednesday. The market consensus anticipates a moderate slowdown in job creation, with the ADP Employment Change expected to show 69K new private jobs in October, down from 90K in September.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.