ASIA FX: USD/TWD NDFs Rebound Strongly, USD/CNH Pushing Towards 7.1100
Nov-17 05:15
In North East Asia, the USD is firmer, with USD/KRW a notable riser, with USD/TWD NDFs have surged, recouped a good proportion of Friday's losses. USD/CNH is tracking towards a 7.1100 test. Broader USD trends are higher, particularly against higher beta plays, while regional equity market sentiment is mixed. Doubts over whether the Fed will ease in Dec is likely lending some USD support, although Tsy yields are down a touch so far today.
- USD/CNH is drifting higher, last around 7.1060. The pair tried late last week on multiply occasions to test under 7.0900 but couldn't, which may signify a short term base. Equally, we still expect upticks to be sold (USD/CNY fixing another fresh low for this year today), with the 50-day EMA back around 7.1275.
- Spot USD/KRW is probing higher, but has found some selling interest above 1460 so far today. Recent support was evident sub 1450, with Friday seeing benefit from the official rhetoric around stabilizing FX supply/demand imbalance, while later on the sharp move lower in USD/TWD NDFs likely saw spill over to the won as well. We expect any up moves in USD/KRW into the 1470/80 region to likely draw selling interest.
- Spot USD/TWD dipped at the open but was supported ahead of 31.00 (lows just under 31.04). We have since recovered to 31.18, which is fresh highs back to May of this year. Friday's announced agreement between the Taiwan central bank and the US Treasury - pledged to avoid manipulating exchange rates and disclose FX intervention and - importantly - prevent "public investment vehicles such as pension funds" from investing abroad for the purposes of targeting the FX rates.
- The market may have been fearful of a repeat of the late April/May sell off in the pair, as local investors increased FX hedges on overseas assets. This hasn't proven to be the case so far and Taiwan has seen to $10bn in offshore outflows in the past trading month from local equities.
- 1 month USD/TWD implied vol spiked towards 10% in the first part of trade, but is now back under 9%. The 1 month USD/TWD NDF is back close to 31.00 (after getting near 30.30 on Friday). We are up +1.5% so far today.
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LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
Oct-17 20:51
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
Oct-17 20:30
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Oct-17 20:28
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
