Weekly Asia FX – Higher US yields and profit taking hurt Asian currencies

by: Georgette Boele

Last week, profit taking pushed Asian currencies lower against the USD. The USD also benefited due to rising yields in the US. The Chinese yuan (CNY), South Korean won (KRW) and the Singapore dollar (SGD) were more resilient due to stronger economic data releases. The CNY was supported due to the strong manufacturing and non-manufacturing PMI releases. A wider current account surplus and the rebound in manufacturing PMI also minimized losses in the KRW. Similarly, losses in the SGD were minimal due to better than expected employment numbers and comments from the central bank that core inflation will be higher, which increased market speculation that a stronger SGD would be tolerated. On the other hand, the Indonesia rupiah (IDR) underperformed against the USD by more than 2% due to a weaker than expected trade deficit and month end USD demand from local corporates. The CNY remains our top Asian FX pick, with more economic reforms expected in the third plenary session on 9-12 November.

 

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