Ahead Today
G3: US ISM services index, ADP employment
Asia: Thailand CPI, Indonesia GDP, Singapore retail sales
Market Highlights
The broad US dollar index (DXY) has climbed above the 100 psychological level. Meanwhile, US equities have come under pressure and Treasury yields have declined, adding to the risk-off sentiment in markets.
The ongoing US government shutdown has now matched its longest duration on record of 35 days, which was set during President Trump’s first term in office. This has disrupted the release of important US macro data, such as the nonfarm payrolls, with policymakers having to rely on alternative indicators for policymaking. However, news reports suggest that a deal is taking shape in the Senate and lawmakers have expressed optimism that an end to the government shutdown may be near.
Meanwhile, Japanese Finance Minister Satsuki Katayama has warned against the rapid depreciation of JPY, which had fallen to a 8-month low. She also stated that authorities are watching yen moves with high sense of urgency. Her remarks triggered a reversal in the yen’s slide, pulling it back from a peak of 154.48 against the US dollar. However, Prime Minister Takaichi has said that the country is still working towards stable inflation, suggesting that the pace of BOJ rate normalization will be gradual. This could continue to weigh on the yen.
Regional FX
Asian currencies were also broadly weaker against the US dollar yesterday, on the back of further US dollar strength. KRW led regional losses with a 0.7% depreciation, on the back of foreign equity outflows. South Korea’s CPI rose to 2.4%yoy in October, up from 2.1% in September and above the market consensus of 2.2%. However, INR held relatively firm against the USD, while PHP strengthened by 0.5%. In India, the RBI has intervened by selling dollars, helping the rupee to pull back from recent low around the 88.80 level. In Thailand, persistent deflation could prompt further BoT easing, limiting THB upside. Thailand’s economy likely remained in deflation in October. The central bank has also said that it will intensify efforts to curb illicit financial flows.