ASIA FX: Won Lags Equity Gains Post Election, Steady CNH & TWD Trends
In North East Asia FX markets, we saw early USD weakness give way to more stability as the Wednesday Asia Pac session has unfolded. There has been focus on the won, post Lee's Presidential election win, but greater focus has arguably been in the equity and bond space. USD/CNH dipped but is back above 7.1900 now. USD/TWD spot is holding just under 30.00, little changed for the session.
- Spot USD/KRW got to lows of 1371.3, but sits near 1375 in latest dealings, still around 0.30% stronger in won terms versus end Monday levels. Still, it has lagged the +2.5% gain for local stocks, as optimism grows new President Lee will be able to do more to boost domestic growth and corporate value. Offshore investors have bought $559.1mn of local stocks today. Bond yields are higher as well, particularly towards the back end of the curve. FX markets may be mindful of how trade talks will unfold from here, with new President Lee not in a rush to sign a deal.
- Spot USD/CNH tracked towards 7.1800 in the first part of trade, but sits back at 7.1915 in latest dealings. This is little changed on end Tuesday levels in the US. The USD/CNY fixing was little changed, while the fixing error returned to negative territory as the USD recovered from recent lows. Focus remains on whether Trump and Xi will speak, with the White House stating a call was likely soon between the two leaders.
- Spot USD/TWD is little changed, holding just under 30.00 in latest dealings.
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BONDS: NZGBS: Bear-Steepener To Start The Week
NZGBs closed showing a bear-steepener, with benchmark yields 3-6bps higher. NZGBs finished near cheaps on a domestic data-light session. There was no cash dealing in US tsys in today’s Asia-Pac session with a holiday in Japan. Today’s US calendar will see the ISM Service PMI.
- Trump says - “NO PLANS TO TALK TO XI THIS WEEK, CHINA AND US OFFICIALS TALKING ABOUT 'DIFFERENT THINGS'”.(per BBG)
- Kato : “We are not considering the sale of US Treasuries as a means of Japan-US negotiations,” Kato spoke in Milan, Italy on Sunday, where he is attending the annual meeting of the Asian Development Bank.(per BBG)
- Swap rates closed 3-4bps higher.
- RBNZ dated OIS pricing closed flat to 2bps firmer across meetings. 26bps of easing is priced for May, with a cumulative 76bps by November 2025.
- Tomorrow, the local calendar will see ANZ Commodity Price data.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 4.25% May-36 bond and NZ$50mn of the 2.75% May-51 bond.
BOBL TECHS: (M5) Monitoring Support
- RES 4: 120.20 High Dec 12 ‘24 (cont)
- RES 3: 120.000 Psychological round number
- RES 2: 119.960 High Apr 7 and the bull trigger
- RES 1: 119.780 High Apr 22
- PRICE: 119.110 @ 05:56 BST May 5
- SUP 1: 119.072 20-day EMA
- SUP 2: 118.622 50-day EMA
- SUP 3: 118.060 Low Apr 10
- SUP 4: 117.680 Low Apr 9 and a key support
A bull cycle in Bobl futures remains in play and the steep sell-off between Apr 7 - 9 is considered corrective. The early April rally resulted in a break of key resistance at 119.040, the Feb 28 high, strengthening bullish conditions. The focus is on the 120.000 handle next. On the downside, firm support lies at 117.680, the Apr 9 low. The 20-day EMA, an important short-term support, is at 118.996.
ASIA STOCKS: Mixed Day with Key Markets Closed
With the larger markets of South Korea and China out today for public holidays, those bourses open were mixed as currencies were the focus. Ongoing USD weakness saw regional currencies perform strongly with several up over 1% today.
- Despite a very strong day for the TWD, the TAIEX started the week on the backfoot down -0.75% today, following on from last week’s strong gains.
- In Malaysia, the FTSE Bursa Malaysia KLCI fell -0.45% following posting strong positive gains last week.
- The Jakarta Composite was up +0.50% following three successive weeks of very strong gains.
- Singapore’s FTSE Straits Times delivered modest gains of +0.10% as did the PSEi in the Philippines which rose +0.25%.
- India’s NIFTY 50 has enjoyed strong inbound FDI of late and lasts week rose +1.28% to mark three successive weeks of gains and has started this week off strongly up +0.50%
