THB: USD/THB Back Under 100-day EMA, Gold Correlation & Stimulus Impact Eyed
USD/THB sits just up from session lows, last 32.44. This is under the 100-day EMA support zone (which tested in Wednesday trade). The 50-day support point at 32.34 isn't too far away and could pave the way for a move into the low 32.00 region, last seen in late Sep. Broader USD sentiment remains softer so far today (ex AUD), with yen gains and the firmer CNY fixing again helping USD/Asia pairs track lower.
- For baht we also have the continued gold price surge (now above $4200). The bottom panel of the chart below plots the rolling 21 day correlation between USD/THB and spot gold. We are negative, as expected but comfortably off recent lows, partly in response to jawboning by the authorities and the BoT. The Citi THB NEER sits 2% off recent highs, with any return to these levels likely to raise FX jawboning again.
- The local focus will be on the impact of recent stimulus measures. J.P. Morgan noted earlier this week: "During the pandemic, the co-payment scheme generated over THB300 billion in consumer spending on a THB340 billion budget, implying a multiplier of 0.88x. Applying this multiplier, the stimulus program will boost 4Q25 GDP growth by over 4% annualized. However, this is a temporary boost for the Thai consumer and we expect growth to fall from 2.2% in 2025 to 1.3% in 2026 as the drag from weaker external demand and US tariffs builds."
- Near term data outcomes are focus on Sep customs trade figures (due next week) and IP. Consumer sentiment remains well off 2024 highs (per the earlier Oct print). The next reading is not due until Nov.
- In the equity space, the SET is still struggling to get a foot hold above 1300. Offshore investors did add +$55mn to local stocks yesterday, but OCt to date flows are still negative.
Fig 1: USD/THB & Spot Gold Correlation
Source: Bloomberg Finance L.P./MNI
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CHINA: China Surprise Index At Fresh 2025 Lows, But Local Equities Supported
Yesterday's softer than expected China data outcomes for August sent the Citi China economic surprise index (EASI) to fresh lows for 2025. It also widened the wedge between this surprise index and China equity trends, see the chart below. Even with mainland China equities down modestly so far today, this only closes the gap a touch (CSI 300 is off around 0.50%).
- To be sure, there have been divergences in the past but usually what we see is positive correlation between the two series, with positive data surprises usually coinciding with higher equity index levels. At face value, concerns around China growth momentum could weigh on equity trends at some stage.
- Still, we may remain divergent in the near term. Firstly, China isn't alone is having softer data outcomes recently relative to expectations. The other major economy EASIs have also softened (although they remain at higher levels relative to the China index). This is impacting these equity markets either, where in the US for example we have hit fresh record highs.
- Focus remains in the tech/AI space. For China the Chinext is up over 40% from start July levels, while the CSI 300 index is up a more modest 15% over the same period.
- The policy shift towards reducing excess capacity in parts of the economy may also weigh on economic activity but aid profitability. This has been a focus in the steel sector in recent months.
- Finally, softer data may encourage views that easier policy settings/economic support will come from the China authorities. Easing Fed expectations has certainly been a support for US/tech led global equity indices in recent months.
Fig 1: Citi China Surprise Index (White Line) and CSI 300 Equity Index (Orange Line)
Source: Citi/Bloomberg Finance L.P./MNI
INDONESIA: MNI Bank Indonesia Preview-Sep 2025: BI Pause, Monitors Events
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- After Bank Indonesia (BI) has had to intervene to defend the rupiah over the last two weeks due to political unrest and then President Prabowo’s decision to remove respected finance minister Indrawati, rates are likely to be left at 5% on 17 September especially given the central bank’s focus on FX stability.
- BI has monthly meetings, so it can be cautious to ensure that the rupiah stabilises, that there aren’t significant portfolio outflows and to monitor political and fiscal developments.
- It expects inflation to stay within its target band this year and next and has eased 125bp so far this cycle and so it can continue to focus on FX stability and be cautious with further rate cuts. We expect it to retain its easing bias.
FOREX: JPY Crosses-Grind Higher, GBP/JPY Breaking Above 200.00, FOMC & BOJ Ahead
US Equities continue to march higher and seem to be pricing in a goldilocks scenario regarding what the potential upcoming cutting cycle could look like. This morning US futures have opened muted, E-minis -0.01%, NQU5 +0.05%. The JPY crosses are grinding higher; it still feels like fresh impetus is needed for them to extend. Could the FOMC or the BOJ this week give it the nudge it needs ? GBP/JPY is breaking 200.00, can it extend before we have had the FOMC and BOJ ?
- EUR/JPY - Overnight range 172.91 - 173.19, Asia is trading around 173.30. The pair is grinding back towards 173.50. The range looks to be 171.00-174.00 for now, a sustained break back above 174.00 would look bullish, but I'm not sure I would play it in the cash market until the FOMC and BOJ is out the way.
- GBP/JPY - Overnight 200.03 - 200.74, Asia trades around 200.40. This pair is now making an effort to push above 200.00, a clear sustained break above 200.00 should regain the momentum higher. Can this break accelerate before we get the FOMC and BOJ, tough ask.
- NZD/JPY - Overnight range 87.75 - 88.02, Asia is currently dealing 87.85. The pair continues to stall around the 88.00 area, a sustained move back above 88.00/88.50 and I will have to reassess my bias lower.
- CNH/JPY - Overnight range 20.6743 - 20.7192, Asia is currently trading around 20.7000. This pair has remained above its pivotal 20.30/20.40 support. The pair continues to trade comfortably within its recent 20.40-21.00 range.
Fig 1 : GBP/JPY 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
