ASIA FX: THB & IDR Outperform, KRW Lags In Monday Trade
Asian currencies are mixed to start the week. THB and IDR have rallied, while the won has lost some ground (albeit remaining with recent ranges).
- USD/CNH has crept back above 7.1300 this afternoon. Earlier lows in the pair were at 7.1244 around the time of the USD/CNY fxing. The fix was set at a fresh low back to Nov last year, but didn't have a lasting impact on sentiment. August trade data was slightly below expectations. Exports rose 4.4%y/y (5.5% was forecast), while imports were up 1.3%y/y (3.4% was forecast). The trade surplus pushed back above $100bn. China equities are lagging the firmer tone seen elsewhere for much of the Asia Pac region, which may a CNH headwind at the margins.
- Spot USD/KRW is back around 1391 in latest dealings. We are off earlier highs close to 1394. Some negative spill over from the weaker yen is likely in play, while headlines have focused on the detained workers at the Hyundai/LG plant in the US. They are expected to be repatriated this week, after being detained as part of a US ICE investigation. Headlines crossed a short while ago from the South Korean FinMin - "S.KOREA FINMIN: WILL CONSULT WITH U.S. TO PREVENT INCIDENTS SIMILAR TO LAST WEEK'S IMMIGRATION RAID AT HYUNDAI PLANT FROM HAPPENING AGAIN", along with "S.KOREA FINMIN: FOREIGN EXCHANGE WILL BE INCLUDED IN TRADE DEAL ANNOUNCEMENT WITH U.S. - [RTRS]". The last comment around FX to be included in the trade agreement with the US has helped bring USD/KRW lower.
- THB has rallied, we were last close to 32.00 versus the USD. The cabinet choices of new Thai PM Anutin, the third since 2023, have been met by relief. He appears to have chosen experience and continuity which is particularly important given that he promised to hold elections within four months to win the support of the People’s Party who hold the most number of seats in the House of Representatives.
- The Rupiah is up strongly in Monday trading, approaching levels that the Central Bank is targeting (16300). We were last close to 16350, up around 0.40% in IDR terms.
- Moves elsewhere are move modest, with a bias towards USD weakness.
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AUSSIE 10-YEAR TECHS: (U5) Recovers With Treasuries
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.710 @ 14:34 BST Aug 8
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures received a boost from the US Treasury rally that followed a poor NFP print. This keeps Aussie 10-year futures toward the top end of the recent range. To the upside, next resistance is at 96.207, a Fibonacci retracement point. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition.
SECURITY: Trump To Sign Trilateral Peace Accord With Armenia/Azerbaijan Shortly
US President Donald Trump is shortly due to sign a trilateral peace agreement with Armenian Prime Minister Nikol Pashinyan and Azerbaijani President Ilham Aliyev at the White House. LIVESTREAM The event will provide another opportunity for Trump to style himself as peacemaker, after touting success in brokering peace deals between Rwanda/Congo, Cambodia/Thailand, and India/Pakistan.
- The accord aims to resolve a decade-long dispute over the sovereignty of Nagorno-Karabakh - a breakaway Azerbaijani province that was under de facto Armenian control from the dissolution of the Soviet Union until a 2020 war.
- Trump described the meeting on Truth Social as a “historic peace summit,” noting that the US will also sign “Bilateral Agreements [to] fully unlock the potential of the South Caucasus Region.”
- White House spokeswoman Anna Kelly told reporters that Trump would sign deals with both Armenia and Azerbaijan on energy, technology, economic cooperation, border security, infrastructure and trade.
- A White House official said: "It's about the entire region, and [the leaders] know that that region is known to be safer and more prosperous with President Trump."
- Reuters reports that the US will have development rights to build transportation links in the strategic Zangezur Corridor, a mountainous stretch of Armenian territory between Azerbaijan and its Nakhichevan exclave.
- Politico notes: “But whether this is just a photo opportunity or a lasting end to a conflict that has undermined stability in a region dominated by Russia and Iran will depend on whether the US can address several key challenges.”
FED: Balance Sheet Runoff Continues At Steady $20B/Month Pace (2/2)
Fed asset holdings were little changed in the past week. SOMA runoff totaled $2.8B (composed of $4.2B less nominal Tsy holdings and $1.4B more TIPS), with emergency lending/liquidity facilities $0.7B lower.
- Over the last 4 weeks, the $20B/monthly expected QT pace was roughly adhered to: MBS fell $18B, with Treasury net holdings down around $2B (a fall in TIPS holdings offsetting a slight rise in nominals).
- Discount window usage accounted for the fall in lending facility usage this week; takeup is now down to $4.9B, down $1.3B in the last month and down from the 1-year high of $6.4B set in July which looks to have been a temporary blip higher.
