ASIA FX: Mixed Trends In NEA, USD/CNH Edges Higher After Thursday Slump
In North East Asia FX, trends have been mixed. The won has struggled but USD/KRW remains sub recent highs. We have seen a modest bound in USD/CNH, but the majority of Thursday's break lower has held. TWD and HKD haven't shifted dramatically.
- USD/CNH got to lows of 7.1159 prior to the USD/CNY fixing. The fix was set lower at 7.1030, but the market was arguably looking for greater downside. USD/CNH was supported post the fixing but didn't test back above 7.1300. The pair was last near 7.1250. Onshore equities continued to push higher, the CSI 300 up a further 0.60%.
- Spot USD/KRW has pushed back above 1388, up around 0.25% versus end Thursday levels. The authorities are stepping up fiscal stimulus, with a wider fiscal deficit next year (4% of GDP, versus 2.8% this year). Local bond yields are little changed though. IP for July was stronger than expected, up 5.0%y/y. Local equities have ticked lower, off 0.20%, with offshore investors net sellers of local stocks this week (-$593.5mn).
- Spot USD/TWD is little changed, last around 30.55.
- USD/HKD spot is near 7.7910, with Hibor rates up strongly in the past week. This keeps us below the mid point of the peg band.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
OIL: Crude Holding Onto Week’s Gains Ahead Of Fed Decision & EIA Data
Oil prices have held onto the week’s strong gains and are slightly higher again in today’s APAC trading as markets wait for the Fed decision later today (see MNI Fed Preview). WTI is up 0.1% to $69.26/bbl. It reached $69.38, just short of resistance at $69.41, coming off a low at $69.01. Brent is 0.2% higher at $72.67, close to the intraday high and above resistance at $72.66. The USD index is down slightly.
- Oil prices have jumped this week on concerns that Russia will ignore the new first week of August deadline for an end to fighting in Ukraine and the resultant US tariffs, especially on countries that buy Russian oil, will significantly impact global supplies.
- President Trump appears not concerned about supply suggesting the US will increase its oil output. In addition, OPEC is expected to increase its production target for September at its August 3 meeting, although apparently it has limited capacity to be able to cover any offline Russian crude.
- Bloomberg reported that there was a crude stock build of 1.5mn barrels last week in the US, according to people familiar with the API data. In terms of products, gasoline fell 1.7mn barrels while distillate rose 4.2mn. The official EIA data is out on Wednesday.
- Not only is the Fed decision announced later today but advanced US Q2 GDP and July ADP employment print. Preliminary Q2 euro area GDP, July EC survey, Spanish July CPI, German June retail sales are also released. Data on both sides of the Atlantic will be watched for signs of any tariff impact. BoC also announces but is expected to be on hold.
BUND TECHS: (U5) Range Base Remains Intact For Now
- RES 4: 131.33 High Jun 20
- RES 3: 130.85 61.8% retracement of the Jun 13 - Jul 14 bear leg
- RES 2: 130.15/76 50-day EMA / High Jul 22
- RES 1: 129.92 20-day EMA
- PRICE: 129.668 @ 05:39 BST Jul 30
- SUP 1: 128.84 Low Jul 25 and the bear trigger
- SUP 2: 128.40 Low Apr 9
- SUP 3: 128.19 Low Mar 27 (cont)
- SUP 4: 127.83 76.4% retracement of the Mar 11 - Apr 7 bull leg (cont)
Bund futures continue to trade above 128.84, the Jul 25 low. Last week’s sell-off resulted in a test of the base of a 3.5-month range at the 129.00 handle. This key support remains intact for now. A hammer candle formation on Jul 25 followed by a bullish engulfing candle on Monday signals a potential reversal. Initial resistance to watch is 129.92, the 20-day EMA. A break of the Jul 25 low is required to confirm a resumption of the bear trend.
BONDS: NZGBS: Richer But Underperformed The $-Bloc
NZGBs closed near session bests, 3-4bps richer.
- Nevertheless, the local market underperformed its $-bloc counterparts, with the NZ-US and NZ-AU 10-year yield differentials 4bps and 2bps wider, respectively.
- The ACGB market was buoyed today by lower-than-expected Q2 trimmed mean CPI, which should allow the RBA to ease 25bp on August 12. Trimmed mean rose 0.6% q/q to be up 2.7% y/y, a moderation from Q1’s 0.7% & 2.9%.
- The ANZ survey showed little change in business confidence and the outlook in July with the former rising 1.5 points to 47.8 but the latter falling 0.3 to 40.6. It signals that the recovery continues but at a gradual pace.
- Swap rates closed 1-3bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed with 21bps of easing is priced for August, with a cumulative 35bps by November 2025.
- Tomorrow, the local calendar will be empty ahead of ANZ July consumer confidence data on Friday. June building permits will also be printed on Friday
- Tomorrow, the NZ Treasury plans to sell NZ$275mn of the 4.50% May-30 bond and NZ$175mn of the 4.25% May-34 bond. NZ Treasury also announced plans to sell NZ$1.8bn of bonds in August.
