EM ASIA CREDIT: SK Hynix: Chipmakers exempt from tariffs
(HYUELE, Baa2pos/BBB/BBB)
Most favoured Nation status for chips, positive
South Korean Trade Minister Yeo Han-koo told SBS that both Samsung Electronics and SK Hynix will receive Most Favoured Nation (MFN) status for chips, exempting them from the 100% tariff previously flagged by US President Trump. This reiterates earlier guidance from the Trade Minister and signals continued preferential treatment for South Korea’s major chipmakers. Positive bias for credit spreads.
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CHINA: Central Bank Withdraws CNY62bn via OMO
- The PBOC issued CNY69 bn of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY131 bn
- Net liquidity withdraws CNY62bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.44%, from prior close of 1.46%.
- The China overnight interbank repo rate is at 1.30%, from the prior close of 1.39%.
- The China 7-day interbank repo rate is at 1.50%, from the prior close of 1.47%.
CNH: USD/CNY Fixing Edges Up, Error Term Widens
The USD/CNY fix printed at 7.1534, versus a Bloomberg market consensus of 7.1796.
- The fixing rose, in line with the stronger USD backdrop seen over the past 24 hours. The fixing error widened though to -262pips, taking a good proportion of the adjustment.
- USD/CNH is little changed so far today, last near 7.1770.
FOREX: AUD Crosses - Traded Heavy, Except AUD/JPY Which Stood Out
Stocks have had an unbelievable run forcing an underweight market to get back in. In the short term it looks a little stretched now and the shorts have been carried out making positioning no longer an issue. Could these tariffs and the threat it poses to global growth be the catalyst now for some reversion back to the mean ? The AUD came back under pressure initially in the crosses but with risk potentially correcting lower the move higher in AUD/JPY stands out.
- EUR/AUD - Overnight range 1.8004 - 1.8091, Asia is currently trading around 1.8020. The pair broke through 1.8000 in Asia yesterday and spent most of the overnight session retracing that move. Support seen back towards 1.7850/1.7900 and the market will be watching for any momentum above this 1.8000 area to extend higher again.
- GBP/AUD - Overnight range 2.0907 - 2.0962, Asia is trading around 2.0920. Decent demand was seen back towards the 2.0700 area last week, the pair continues to trade sideways in the wider 2.0500 - 2.1050 range. A break above 2.1050 could potentially see momentum pick up for an extension higher.
- AUD/JPY - Overnight range 94.29 - 95.04, Asia is trading around 95.15. The pair found solid demand back towards 94.00 which stands out considering risk traded lower. The range looks to be 93.50 - 96.00 a break needed for clearer direction.
- AUD/NZD - Overnight range 1.0821 - 1.0845, the cross is dealing in Asia around 1.0835. The cross is struggling to get any momentum for now. It looks to be in a 1.0750 - 1.0850 range for now as it awaits a catalyst to provide some direction. Can the RBA today and RBNZ tomorrow give this pair the energy it needs to move higher again ?
Fig 1: AUD/NZD spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
