ASIA FX: USD/KRW Dipping Towards Recent Lows, USD/TWD Eyeing 30.00 Test Again
In North East Asia FX markets, the USD bias has been weaker, albeit pairs have respected recent ranges. USD/CNH is lower, but only marginally sub the 7.2000 level. The won has been the standout, up 0.75%, putting USD/KRW back close to recent lows. TWD has climbed but has been unable to breach the 30.00 level. USD/HKD is higher though, as liquidity makes long USD/HKD an attractive carry trade.
- USD/CNH sits near 7.1980 in latest dealings, down a touch on end NY levels from Thursday. The USD/CNY fixing edged higher, but broader USD losses, particularly against the majors has provided an offset. Once again though, the CNH has maintained a very low beta with respect to such moves. The CSI 300 has climbed but remains below recent highs.
- Spot USD/KRW is back close to 1372/73, up around 0.75% in won terms and tracking towards recent lows sub 1370. KRW has been the best Asian FX performer so far this week, aided by on-going speculation around US-South Korea FX policy discussions. A clean break lower could see 1350 targeted on the downside.
- With USD/TWD support continuing to hold around 30.00, we may be seeing some rotation back into KRW, where more near term gains may materialize. The USD/TWD NDF space is seeing greater downside though, with the 1 month back under 29.70 today.
- Spot USD/HKD is close to week to date highs, last near 7.8320. Continued moves lower in Hibor rates is weighing on HKD.
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GOLD: Tracking Lower For 2nd Straight Session, But Still Well Above Key Support
Gold made lows just under $3316 in the first part of trade, where liquidity was lighter amid strong USD gains. We stabilized since then but found selling interest above $3386. We last racked near $3340, still off 1.20% for the session.
- Gold has been moving in lock step with USD weakness recently, so it no surprise that we have corrected lower for bullion as USD sentiment has stabilized. Trump remarks, particularly around having no intention to fire Fed Chair Powell, has aided USD sentiment, but we sit off earlier highs though for the BBDXY index (last under 1224).
- Gold is still in a technical bullish uptrend though. Focus will be on re-testing $3500 on the upside. Initial firm support lies at $3163.5, the 20-day EMA.
ASIA STOCKS: All In The Green Amid Tariff Hopes/Trump Call On Powell
Asia Pac equity markets are all in the green, led by tech related plays and Hong Kong markets. We had strong cash gains in US markets on Tuesday, while US futures are firmly in the first part of Wednesday trade. Trump remarks have dominated sentiment, with the US President stating he had no intention of firing Fed Chair Powell (which has been a source of concern for markets recently), while also stating final tariff levels on China will be lower than the 145% that currently prevails. This followed reported comments from US Tsy Secretary Bessent that the tariff standoff is unsustainable, and he expects de-escalation with China.
- Eminis are up over 1.5%, but the contract has been unable to sustain +5400 levels. A move into 5500/5600 region would likely be needed to unnerve recent shorts for this benchmark. Nasdaq futures are +1.8% at this stage.
- Japan markets are up over 2% at this stage, with the NKY 225 trending back towards 35000. The Taiex has outperformed in Taiwan up nearly 4%, while the South Korean Kospi is up around 1.5%, above 2500 in index terms.
- Hong Kong markets have the HSI up 2.4% at the break, with the tech sub index over 3%.
- Despite appearing to soften his stance on China, onshore China markets are only a touch higher at this stage. The CSI 300 up +0.22%, lagging the gains seen elsewhere.
- Trends are slightly more modest in SEA markets, the Singapore Straits Times up around 1%, same too for JCI in Jakarta, +1.2%. Gains elsewhere though are under 1%, while Philippine markets are down slightly.
US TSYS: Asia Wrap - Yields Drift Lower In The Long End
TYM5 has traded higher with a range of 110-20 to 111-00+ during the Asia-Pacific session. It last changed hands at Heading 110-29, up 0.04 from the previous close.
- The US 10-year yield is drifting lower, dealing around 4.34%, down from its open around 4.40%
- The US 2-year yield is unchanged, dealing around 3.81%
- Risk has reversed higher as Trump makes a U-turn saying he won’t fire Powell and made comments that seemed to soften his stance towards China.
- Block Curve flattener flows : SELL 8200 of USM5 traded at 108-06, post-time 01:25:20 BST (DV01 $353,017). BUY 2800 of USM5 traded at 114-22, post-time 01:25:20 BST (DV01 $353,492).
- 10-year Yields, having bounced off their support around the 4.25 area, yields are consolidating with the range looking something like 4.25/4.50% for now.
Data/Events : US S&P Global Services & Manufacturing PMI, New Home sales
