RIKSBANK: Seim Re-iterates Wait-and-see Stance

Kiwi has been one of the strongest performers in today’s US dollar sell off. NZDUSD is up 1.2% to 0.6006, above 60c for the first time since November. It reached a high of 0.6007. With US equity futures selling off, Aussie has underperformed much of the G10 but is still stronger on the day. The BBDXY USD index is down 0.8%.

• AUDUSD is up 0.8% to 0.6425 after a high of 0.6427, the highest since December, above resistance at 0.6392 & 0.6409(key resistance), and approaching 0.6428. A break above this level would open up 0.6471. It has spent the latter part of the session above 64c.
• As it is underperforming the rest of the G10 except for Canada, the Aussie crosses are all weaker. AUDNZD is down 0.4% to 1.0697 after a trough of 1.0694, lowest since March.
• With the euro outperforming, AUDEUR is down 0.4% to 0.5573 but off the intraday low of 0.5555, the lowest since March 2020. AUDGBP has recovered from 0.4782 to be down only slightly at 0.4797.
• On Tuesday, NZ March trade data and preliminary April Australian S&P Global PMIs are released.

Indonesia’s March trade surplus widened to $4.33bn, highest since November, from $3.117bn when a narrowing had been forecast. Exports were stronger than expected rising 3.2% y/y when a 2.4% fall had been expected. Imports grew 5.3% y/y up from 2.3% in February but moderately slower than forecast. The data are too early to show any impact from the US’ increased trade protectionism with the universal 10% tariff not implemented until this month. 

Indonesia merchandise trade balance US$mn vs 3-month ma

• USDIDR is around 16804 today after a high of 16840 on Thursday. The fall in the pair is due to broad-based US dollar weakness (BBDXY USD index -0.7%) following comments from US President Trump that the Fed should cut rates and threats that he may replace Chairman Powell.
• The US administration announced a 32% duty on imports from Indonesia as part of the reciprocal tariff package. At this point, it has been delayed and Indonesia hasn’t retaliated. It expects a deal with the US within 60 days. Indonesia is highly exposed to China though with 24% of 2024 exports going there, while 10.6% were shipped to the US. Thus it is highly vulnerable to an unresolved US-China trade war.
• March non-oil & gas annual export growth was driven by agriculture +32.8% y/y and manufacturing +9% y/y, with shipments to all major destinations posting positive annual growth, except to India.
• Q1 nominal exports rose 6.9% y/y and imports around 1.5% y/y.

Indonesia goods exports vs imports y/y% 3-month ma

Source: MNI - Market News/LSEG

• Chinese plastics factories that depend on ethane gas that is predominantly imported from the US are may be forced to limit production as the world’s two largest economies go head to head in a trade war.  (source BBG)
• The benchmark lending rates in China remained unchanged this month at 3.1% for the 1-year and 3.6% for the 5-year as officials patiently wait to see how the trade war plays out across the economy before they alter policy.   (source DJ)
• The Hang Seng rose +1.6% today for one of the biggest gains in the region, with the CSI 300 not as euphoric rising just +0.15%, Shanghai Comp +.30% and Shenzhen Comp +0.99%.
• Yuan Reference Rate at 7.2055 Per USD; Estimate 7.2926
• China’s 10YR rose +1bp today to be at 1.66%