KRW: Won Firmer, But Lagging USD Softness, USD/KRW Challenges 20-day EMA Support
Spot USD/KRW is tracking within familiar ranges in the first part of Thursday dealings, still underperforming broader USD weakness. We sit in 1466/67 region, down 0.30% from Wednesday's close, but the 1 month NDF sits up 0.10%, last 1464/65, unable to build on won gains that prevailed amid Wed US trade (post the FOMC outcome, which was not as hawkish as feared). The 1 month NDF got to lows around 1462 in Wednesday trade.
- Spot USD/KRW has challenged 20-day EMA support (last around 1465), but has been unable to sustain any break lower. A clean break lower could bring the 50-day EMA near 1448 into play. On the topside, Dec highs to date were close to 1475. Reports of National Pension Service USD sales is helping cap the pair, while the the authorities also said earlier that they will strength monitoring of FX and bond markets and take steps if needed.
- Local media report the NPS will hold a meeting on Dec 15 to discuss the FX swap with BOK (which expires at the end of this year). Focus will also be on, via BBG: "Market attention is also on whether NPS will discuss issues regarding the strategic FX hedging policy for up to 10% of overseas investment assets, which is scheduled to expire at the end of this year"
- In the equity space, the tone is mostly positive, with the Kospi tracking towards early Nov highs above 4225 (last 4168). Offshore investors have added $700mn to local stocks so far this week.
- On the data front, the first 10days Dec trade data showed exports up a healthy 17.3%y/y (prior was 6.4%).
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CNH: USD/CNY Fix Edges Up, Fixing Error Steady, CNH/JPY Probing Higher
The USD/CNY fix printed at 7.0866, versus a BBG market consensus of 7.1197. The fixing is a touch above yesterday's outcome, while the fixing error is little changed at -331pips. USD/CNH is a little higher post the fixing, but at 7.1250 remains within recent ranges. Broader USD sentiment is mostly positive so far today, with USD/JPY probing recent highs near 154.50. The CNH/JPY cross is above 21.67, with upside focus to be on recent highs around 21.70.
CHINA: Central Bank Injects CNY286.3bn via OMO
Money market rates still remain elevated as the PBOC has another day of significant liquidity injection. The overnight money market rate spiked this morning to its highest level since July.
- The PBOC issued CNY403.8n of 7-day reverse repo at 1.4% during this morning's operations.
- Today's maturities CNY117.5bn.
- Net liquidity injects CNY286.3bn.
- The PBOC monitors and maintains liquidity in the interbank system through the issuance of reverse repo.
- The CFETS Pledged Repo Deposit Institutions 7 Day Weighted is at 1.43%, from prior close of 1.49%.
- The China overnight interbank repo rate is at 1.53%, from the prior close of 1.45%.
- The China 7-day interbank repo rate is at 1.54%, from the prior close of 1.50%.
JPY: USD/JPY Probing Recent Highs Near 154.50, 155.00 Next Upside Focus Point
USD/JPY is pressing towards 154.45/50, which has marked recent highs. There has been a variety of official comments this morning, although the only directly FX related one was the remark around weaker yen driving import costs higher. The rest are largely focused on upcoming fiscal support and broader policy goals (positive real wages etc). Broader USD sentiment is firmer, with all of the G10 down versus the USD at this stage (yen is slightly underperforming). US equity futures are ticking up. A clean break higher in USD/JPY is likely to see 155.00 targeted.
Fig 1: USD/JPY Probing Recent Highs
Source: Bloomberg Finance L.P./MNI
