CHINA: S&P Global China PMI Manufacturing Suddenly Contracts

The BBDXY range overnight was 1185.43 - 1191.23, Asia is currently trading around 1188. The BBDXY initially made new lows overnight before finally finding some demand around the 1185 area, this looks to potentially be some paring back of shorts as the market eyes the NFP on Thursday. This USD has opened slightly lower in the Asian session, -0.10%. The larger picture remains one of USD weakness, short-term though price is beginning to look a little stretched and we could see more profit-taking heading into NFP. In the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area.

• (Bloomberg) -- “The dollar is set for deeper losses in the second half because US policy volatility is overwhelming support from yield differentials and a patient Federal Reserve.”
• Robin Brooks on X: “Is a Trump risk premium dragging down the Dollar? That's the consensus, but data say otherwise. The Dollar fall is really just about markets pricing a dovish Fed, which makes no sense because tariffs are about to push up US inflation.”
• Otavio Costa on X: “Fascinating move. You can tell a secular decline in the dollar is likely underway when emerging market currencies begin breaking key resistance levels. Dollar downturns tend to be long-lasting and broad-based, typically fueling rallies in metals, other commodities, and foreign currencies. The last time we saw this kind of shift was in the 1970s and again in the early 2000s. We have probably triggered another one of these cycles, in my view.” The BBDXY has broken convincingly now below 1200, this close could prove to be significant and points to the potential start of another leg lower, first target 1150 and then beyond.
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
• Data/Events :  MNI Chicago PMI, Dallas Fed Man. Activity, NFP on Thursday will be very important.

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

Today’s auction showed solid pricing for ACGBs, with the weighted average yield coming in 0.45bps below prevailing mid-yields, according to Yieldbroker. However, the cover ratio nudged lower to 3.3625x from 3.4444x at the previous auction. 

• As noted in our preview, the current yield for this bond was approximately 10bps below the level of the previous auction and 60bps below the high recorded in early November 2024.
• The 3/10 yield curve was around the same level as the previous auction but sat around 20bps below its recent high.
• Following the auction, both the cash line and XM remained relatively unchanged.

Taiwan enjoys $6.6bn of inflows over last six trading days. 

• South Korea: Recorded inflows of +$106m yesterday, bringing the 5-day total to -$1,921m. 2025 to date flows are -$9,262. The 5-day average is -$384m, the 20-day average is +$106m and the 100-day average of -$76m.
• Taiwan: Had inflows of +$1,685m yesterday, with total inflows of +$5,423 m over the past 5 days. YTD flows are negative at -$4,244. The 5-day average is +$1,085m, the 20-day average of +$444m and the 100-day average of -$4m.
• India: Had inflows of +$97m as of the 30th, with total inflows of +$1,401m over the past 5 days.  YTD flows are negative -$8,155m.  The 5-day average is +$280m, the 20-day average of +$131m and the 100-day average of -$5m.
• Indonesia: Had outflows of -$43 yesterday, with total outflows of -$54m over the prior five days.  YTD flows are negative -$3,280m.  The 5-day average is -$11m, the 20-day average -$24m and the 100-day average -$31m.
• Thailand: Recorded outflows of -$24m yesterday, with inflows totaling +$50m over the past 5 days. YTD flows are negative at -$2,361m. The 5-day average is +$10m, the 20-day average of -$13m and the 100-day average of -$21m.
• Malaysia: Recorded inflows as of +$26m yesterday, totaling +$65m over the past 5 days. YTD flows are negative at -$3,703m. The 5-day average is +$16m, the 20-day average of -$13m and the 100-day average of -$20m.
• Philippines: Recorded inflows of +$17m yesterday, with net inflows of +$3m over the past 5 days. YTD flows are negative at -$577m. The 5-day average is +$1m, the 20-day average of -$3m the 100-day average of -$5m.