Asia FX: Stronger Dollar and Oil weigh on CNY and peers – BNY

BNY’s Geoff Yu highlights that a stronger US Dollar (USD), higher Oil prices and rising global yields are pressuring Asian currencies and assets. Chinese Yuan (CNY) remains relatively resilient but is drawing official scrutiny, while Indian Rupee (INR), Philippine Peso (PHP), Thai Baht (THB) and South Korean Won (KRW) look vulnerable or stretched. Yu maintains its call to increase CNY hedges without chasing recent appreciation.

CNY resilience and regional pressure

"Asia’s macro calendar will test whether external demand remains resilient as domestic momentum stays uneven."

"A stronger U.S. dollar, elevated oil prices, rising global bond yields and renewed foreign outflows continue to pressure Asian currencies, equities and fixed income."

"Differentiation remains the key regional theme, but recent divergences are becoming stretched, while further currency depreciation is testing the limits of central-bank FX smoothing operations."

"CNY remains one of the region’s most resilient currencies, but its strength is drawing greater official attention, reflected in the widening counter-cyclical factor (CCF) in daily USD/CNY fixings."

"Our call to increase CNY hedges without chasing the rally continues to play out: iFlow scored holdings have moved further into underheld territory as the pace of appreciation slows."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)