ASIA FX: CNH Tests Under 6.9000, USD/KRW Following USD/JPY Lower
In North East Asia, the bias has been for softer USD/Asia trends, with USD/CNH breaking sub 6.9000. USD/JPY has continued to fall, getting under Wednesday lows, while broader USD sentiment is mostly weaker. The equity tone is mixed, with Taiwan's stock market already closed for the lunar new year break. The Kospi has rallied strongly, up near 5500, (+2.5%), to fresh record highs.
- The break under 6.9000 for USD/CNH came after the onshore spot open, with USD/CNY tracking lower (although onshore spot hasn't broken under 6.9000 yet). Follow through downside for USD/CNH has been limited, with lows so far of 6.8965 (last near 6.8995). These are levels last seen in 2023, with Apr lows from that year near 6.8300. Next week onshore markets are out for the Lunar New Year break. When we return focus will be on if we see continued conversion of offshore earnings into local FX and whether the authorities push back more on CNY gains (the CNY CFETS basket is still under recent highs though, off by around 1.1%).
- Spot USD/KRW continues to retrace off recent highs, the pair back close to 1441, up a further 0.40% in won terms so far today. We are under the 100-day EMA support point, with a break under 1440 likely to see the 1420 region targeted, which marked late Jan lows. Spill over from yen gains is evident, with recent correlations firm between the two currencies.
- USD/TWD continues to track lower, but TWD is only up a further 0.20% to be just under 31.40. Onshore FX markets trade tomorrow before being out next week for the lunar new year break. Downside focus for USD/TWD will be at 31.27 (late Jan lows). the 100-day EMA rests near 31.21. Inflow momentum from offshore investors surged prior to the LNY break for onshore equities.
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US TSY FLOWS: BLOCK CURVE FLATTENER: SELL TUH6 / BUY UXYH6
SELL 8300 of TUH6 traded at 104-07 3/4, post-time 15:01:41 AEST (DV01 $317,407). The contract is currently trading at 104-07 3/4, 0-00 3/8 from closing levels.
BUY 3540 of UXYH6 traded at 114-23, post-time 15:01:41 AEST (DV01 $317,827). The contract is currently trading at 114-23, 0-01+ from closing levels.
NZD: NZD/USD - Drifts Higher, Bears Need To Cap Move Below 0.5810-0.5830
The NZD/USD had a range today of 0.5766-0.5781 in the Asia-Pac session, it is currently trading around {NZD Curncy}. The NZD has been grinding higher thanks to the headwinds faced by the USD. The NZD has put in what looks like a top around 0.5850 and while this continues to cap I suspect the short-term could see bounces initially faded. On the day, the NZD bears need to hold this area toward 0.5810 to remain in control, a move back above 0.5810-0.5830 would negate what looked like the beginning of a new leg lower. Look for sellers up here initially with a view to reestablishing a potential downtrend.
- MNI AU - NZIER Survey Shows Surge In Business Conditions, Inflation Steady: The Q4 NZIER (New Zealand Institute of Economic Research) Quarterly Survey of Business Opinion (QSBO) printed this morning and showed a strong improvement versus the Q3 result. This should increase confidence in the economic recovery taking hold in 2026, and adds to the case for a steady RBNZ hand in the near term (at the margin).
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5800(NZD400m), 0.5830(NZD373m). Upcoming Close Strikes : 0.5745(NZD349m Jan 14), 0.5800(NZD420m Jan 16) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 40 Points
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
CHINA: 10-Yr Bond Future Near Key Tech Level, NDIRS Steady (amended)
- China bond futures are higher today, following the first significant liquidity injection of the year via the OMO.
- The 10-Yr is up +.04 at 107.83 having spoked to 107.87 earlier and the 2-Yr is flat at 102.32.
- The move higher in the 10-Yr sees it near to its topside resistance from the 20-day EMA at 107.89.
- Cash is slow today with the 2-Yr at 1.43% and the CGB 10-Yr down modestly in yields at 1.85%
- 2-year NDF are flat at 1.50 and 10-Yr flat at 1.74%
- The next key event for markets will be the trade data for December out tomorrow.
