ASIA FX: SEA FX Trends Steady, USD/INR Volatility Continues

Asian markets declined as stronger-than-expected US jobs data dampened hopes for further Fed rate cuts, with the MSCI Asia Pacific Index down 1.1% and benchmarks in Hong Kong, Taiwan, and South Korea leading losses. Chinese stocks extended declines despite record-high exports, with investors awaiting more pro-consumption policies. Brent crude rose above $81 a barrel after aggressive US sanctions on Russia, adding inflationary pressure for central banks. 

• India's Nifty 50 and Sensex slumped to multi-month lows, pressured by surging oil prices, rising Treasury yields, and weak earnings growth, with financial services stocks driving the decline.
• GS strategists remain bullish on Chinese stocks, predicting a 20% rise by year-end despite recent market turmoil. They expect sentiment and liquidity to improve by late Q1 2025 due to better tariff and policy clarity. Goldman recommends government consumption proxies, exporters benefiting from a weaker yuan, and select tech, infrastructure, online retail, media, and healthcare stocks, while upgrading consumer services to overweight.
• Apple's Chinese suppliers saw their shares drop after analyst Ming-Chi Kuo projected 2025 iPhone shipments at 220-225m units, below Wall Street's 240m consensus. Apple shares fell 2.4% on Friday following the report. Key suppliers, including AAC Technologies (-3.8%), Hon Hai (-4.1%), Quanta (-3.7%), and GoerTek (-2.6%), experienced declines here in Asia
• Traders now expect limited Fed rate cuts in 2025, with fed fund futures now pricing in just a single rate cut around the Oct/Dec meetings the markets remain cautious ahead ahead of key US inflation data this week.
• APAC markets: Japanese equities closed, South Korea's KOSPI is -1%, KOSDAQ -1.20%, Taiwan's TAIEX -2.10%, Hong Kong's HSI -1.15%, China's CSI 300 -0.45%, Australia's ASX200 -1.30%, New Zealand's NZX50 -0.55%

The USD remains on the front foot, particularly against GBP and EUR, which typically don't move much during the Asia Pac time zone. The USD BBDXY index was last above 1321.7, above intra-session highs from Friday's US session. 

• As the session has unfolded GBP losses have accelerated. GBP/USD was last near 1.2130/35, off a little over 0.60% and the worst G10 performer so far today. This is fresh lows in the pair back to 2023.
• There don't appear any fresh catalysts for the move, other than continuation of losses from last week, amid financial stability/twin deficit concerns.
• EUR/USD is back to 1.0210, testing under Friday lows as well. This puts the pair back to levels last seen in 2022. We are around 0.30% weaker against the USD. SEK is off around 035% as well, last near 11.26 against the USD.
• AUD and NZD initially showed some resilience but this hasn't been sustained. AUD/USD was last sub 0.6135, fresh lows back to 2020. NZD/USD is close to 0.5550. We had Australian and NZ data prints, but they didn't shift the sentiment needle.   
• Equity sentiment has been weak throughout the region, following losses in US markets on Friday (weighed by higher US yields post NFP). There has been no US Tsy cash trading so far today, with Japan markets out.
• Yen is benefiting from the risk averse tone, with USD/JPY upticks towards 158.00 sold. We were last near 157.50, around 0.15% stronger in yen terms.
• There were a raft of headlines earlier around PBoC support for the yuan, but this didn't support CNH greatly.
• Looking ahead, it is relatively quiet with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance on tap. 

ACGBs (YM -15.0 & XM -10.0) are sharply weaker and hovering near Sydney session cheaps.

• Outside of the previously outlined MI Inflation Index and ANZ-Indeed job advertisements, there hasn't been much by way of domestic drivers to flag.
• There have been no cash dealings in US tsys in today’s Asia-Pac session with Japan out for a holiday. TYH5 is, however, weaker at 107-07+, -0-05 from NY closing levels. This week, CPI and PPI inflation measures are on Wednesday and Thursday respectively. The scheduled Fed speaker docket is muted with the Fed Blackout on Friday.
• Cash ACGBs are 10-14bps cheaper, led by the short end.
• Swap rates are 9-12bps higher, with the 3s10s curve flatter.
• The bills strip has sharply bear-steepened, with pricing -5 to -15.
• RBA-dated OIS pricing is 3-16bps firmer across meetings today. A 25bp rate cut is now less than fully priced for April (97%), with the probability of a February cut at 65% (based on an effective cash rate of 4.34%).
• Tomorrow, the local calendar will see Westpac Consumer Confidence data.
• AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold on Wednesday and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.