Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
US dollar stages rebound after Wednesday’s CPI sell-off
The US dollar staged a small recovery on Thursday, helped by higher import prices, but the focus in Asia is mainly on today’s key Chinese data.
The USD/CNH climbed from two-week lows as the Chinese yuan weakened with monthly activity numbers including industrial production and retail sales both due at 10.00am local time (12.00pm AEST).
In other markets, the greenback was higher, with the GBP/USD down from six-week highs and EUR/USD down from two-month highs.
The Aussie also weakened with the AUD/USD reversing sharply from four-month highs after the April unemployment rate jumped by more than forecast – up from 3.8% to 4.1% (the market was looking for 3.9%).
Overall jobs growth was better than expected, though, up 38.5k versus the 20k expected. This shows that the unemployment rate was actually boosted by an increase in the participation rate (up from 66.6% to 66.7%) and therefore the Australian jobs number might not as be as bad as the market’s initial reaction suggests.
USD/SGD leads rebound from two-month lows
Across Asia, one of the most notable moves was in USD/SGD which jumped sharply from two-month lows.
Looking ahead, we anticipate a significant improvement in non-oil domestic export (NODX) growth to -6.7% y-o-y in April from -20.7% in March, aided by a sequential increase in pharmaceutical exports and a less significant decrease in electronics exports.
This suggests that NODX growth staged a robust sequential comeback, rising from -8.4% to 15.2% m-o-m sa.
Looking forward, the Monetary Authority of Singapore is unlikely to decrease in the “immediate quarters ahead,” more advancements in the areas of deflation, growth risk mitigation, and better labor market circumstances may cause a shift in course early in 2025.
Currently, the USD/SGD has shown bearish divergence with short term view suggesting the risk of further losses in the pair.
USD/MYR reversal a sign of things to come in Asia?
Ahead of Malaysian current account numbers, Q1 GDP growth looks likely to match the advance estimate, which indicated a rise to 3.9% y-o-y from 3.0% in the preceding quarter.
Given that the primary income deficit most likely stabilized after abruptly expanding, we anticipate the current account surplus to rebound to MYR4.9 billion in Q1 following a precipitous decline to MYR0.3 billion in the previous quarter. In line with the monthly trade statistics, the goods trade surplus continued to exist. These numbers are key — MYR FX is still dependent on the conversion patterns of exporters.
The USD/MYR pair has produced a significant reversal in line with recent weakness in the dominant USD/JPY pair. The price action has formed a potential head-and-shoulders or triple top formation. A move significant move lower might call a short-term end to the USD’s recent strength in Asia.
AUD, NZD ease from highs as USD recovers
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 13 – 18 May
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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