PHILIPPINES: CPI Moderates Further

• MNI: AUSTRALIA MAR BUILDING APPROVALS -8.8% M/M, +13.4% Y/Y

• MNI: AUSTRALIA APR DWELLING APPROVALS -8.8% M/M
• MNI: AUSTRALIA APR DWELLING APPROVALS +13.4% Y/Y

The BBDXY range overnight was 1218.49 - 1223.07, Asia is trading around 1224. The USD is attempting to stabilize in Asia as China returns from holidays and the markets attempt a return to some normality in USD/Asia after the carnage of the last 2 days.

• Goldman Sachs - “ We had highlighted in a report earlier in the week that one of the key catalysts for a move lower in USD/Asia could be a repatriation of Dollar earnings, with exporters selling USDs, in particular USD/TWD. Foreign currency deposits in nominal terms and as a percentage of system deposits have been trending higher in Taiwan for most of the past 10 years, and more broadly in Malaysia, Thailand, and the Philippines over the past 3-4 years. This behavior reflected higher deposit rates for USD compared to several low-yield markets in Asia, and a persistent Dollar strengthening trend. Not surprisingly then, with the Dollar under pressure, and the risk of lower rates given elevated recession risks in the US, the risk and reward of maintaining Dollar deposits looks markedly different for Asian exporters. And consequently exporter behavior appears to be shifting as well.”
• After such an impulsive move in very thin liquidity due to Asian holidays, we can expect some sort of a bounce but if this is a paradigm shift, the longs that had been unable to exit due to the speed of the move will be using bounces to pare those back.
• This adds weight to a market that was already bearish the USD as an overweight in US assets has begun to be reduced and Asia is now joining the fray.
• Resistance in the BBDXY is around 1230, the market failed here initially and price action suggests sellers will be around there once more.
• Data : US Trade Balance

Fig 1: Bloomberg ASIA/USD Basket Daily Chart

Source: MNI - Market News/Bloomberg