ASIA FX: TWD Outperforms With Local Equities, USD/CNH Down Modestly
In North East Asia FX, the USD has tracked lower, although KRW and TWD have outperformed CNH. TWD has been buoyed by onshore equity market strength, with chip bellwether TSMC exempt from a 100% chip import tariff announced by US President Trump (per the local authorities). USD/HKD remains close to the top end of the peg band, last around 7.8495.
- USD/CNH sits near 7.1820 in latest dealings, down slightly from end NY levels on Wednesday. The USD/CNY fix was set at a fresh low back to early Nov last year. Still, any CNH surge is unlikely to unfold dramatically. The July trade figures were better than forecast, showing firmer export and import trends, particularly on the latter. The trade surplus was slightly below forecasts.
- USD/KRW has drifted a little lower, the pair last near 1383, around 0.25% stronger in won terms versus end Wednesday levels. Local equities are firmer, up a little over 0.60%. The authorities noted that chipmakers Samsung and SK Hynix won't subject to 100% chip tariff threat from US President Trump.
- Spot USD/TWD is down sharply, the pair back to 29.80/85. up around 0.50% in TWD terms. This puts us close to the 50-day EMA support point (29.79). Recent highs in the pair were marked just above 30.03. The better equity tone is helping sentiment in the FX space. The Taiex has surged +2.2% to put the index around the 24000 level. This is fresh highs back to mid 2024. TSMC is up over 4%, after earlier reports stated the tech bellwether would be exempt from the 100% chip tariff announcement made by US President Trump. To the extent this aid fresh inflows into Taiwan stocks it should be a TWD positive.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EURUSD TECHS: Trend Signals Remain Bullish
- RES 4: 1.1967 2.0% 10-dma envelope
- RES 3: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1851 High Sep 10 2021
- RES 1: 1.1829 High Jul 01
- PRICE: 1.1745 @ 06:04 BST Jul 8
- SUP 1: 1.1687 Low Jul7
- SUP 2: 1.1637 20-day EMA
- SUP 3: 1.1590 Low Jun 25
- SUP 4: 1.1458 50-day EMA
The trend condition in EURUSD is unchanged, signals remain bullish and the latest pullback appears corrective. MA studies are in a bull-mode position, this continues to highlight a dominant medium-term uptrend. Note that corrections have been shallow. This also reinforces the trend condition. A resumption of gains would signal scope for a climb to 1.1851, the Sep 10 2021 high. Key short-term support to watch lies at 1.1637, the 20-day EMA.
JGBS: Aggressive Bear-Steepening
JGB futures are weaker but sitting in the middle of today’s range, -12 compared to settlement levels.
- (Bloomberg) -- "Japan's super-long bonds extended their recent declines, pushing the yield on 30-year debt back above 3% and within sight of a record high. The moves come as investors weigh the impact of a new Aug. 1 deadline for US tariffs and as concern mounts that an upper house election in Japan on July 20 will usher in higher government spending."
- Cash US tsys are slightly cheaper in today's Asia-Pac session.
- Politico: "The United States has offered an agreement to the European Union that would keep a 10 per cent baseline tariff on all EU goods, with some exceptions for sensitive sectors such as aircraft and spirits, an EU diplomat and a national official told POLITICO."
- Cash JGBs have twist-steepened across benchmarks, with yields 1bp lower to 14bps higher. The benchmark 5-year yield is little changed after today's supply.
- Today’s 5-year JGB auction showed mixed signals on demand. The low price came in line with expectations, but the bid-to-cover ratio declined to 3.5411x.
- Swap rates are also showing a twist-steepener, with rates 1bp lower to 7bps higher.
- Tomorrow, the local calendar will see M2 & M3 Money Stock and Machine Tool Orders(P).
AUD: Asia Wrap - RBA Surprises Market Helping The AUD To Bounce
The AUD/USD has had a range of 0.6491 - 0.6558 in the Asia- Pac session, it is currently trading around 0.6540, +0.75%. The pair has popped higher as the RBA surprised the market by holding rates at 3.85% when a cut was almost fully priced in by the market. This has seen the AUD/USD almost completely erase all its losses from yesterday, where it trades from here will now depend on the fortunes of the USD going forward.
- ”The Board continues to judge that the risks to inflation have become more balanced and the labour market remains strong. Nevertheless it remains cautious about the outlook, particularly given the heightened level of uncertainty about both aggregate demand and supply. The Board judged that it could wait for a little more information to confirm that inflation remains on track to reach 2.5% on a sustainable basis.” - (BBG)
- (Bloomberg) -- Japanese investors bought the largest amount of Australian sovereign bonds in two years in May, according to the Asian nation's latest balance-of-payments data. Net purchases totaled ¥213.6 billion, the most since April 2023, and followed four months of selling
- The AUD/USD has bounced strongly off its support around 0.6500, back to the 0.6500 - 0.6600 range for now as it will now take its cues from the USD, a break of 0.6600 could signal a move back towards 0.6900/0.7000.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6435(AUD904m), 0.6375(AUD 722m), 0.6545(AUD 493m). Upcoming Close Strikes : 0.6425(AUD700m July 9), 0.6300(AUD866m July 8)
- CFTC Data shows Asset managers pared back their shorts slightly -35992, the Leveraged community maintained their shorts -22903.
- AUD/JPY - Today's range 94.73 - 95.69, it is trading currently around 95.50, +0.70%. The pair found solid demand back towards 94.00 which stands out considering risk traded lower overnight. The range looks to be 93.50 - 96.00 a break above 96.00 could see a further paring back of AUD/JPY shorts.
Fig 1: AUD/JPY spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
