2 May 2014
Asia EM Express: Asian currencies rise on positive data, Fed's pledge to keep rates low
On Thursday and Friday other Asian countries followed China in releasing April Manufacturing PMI numbers. In Taiwan the indicator declined to 52.30 from 55.30. In Indonesia it rose a notch from 50.10 to 51.10, while in India it remained unchanged at 51.30.
On Thursday Indonesia also published inflation and trade balance numbers. On an annual basis CPI growth slowed down to 7.25% in April from 7.32% in March, in line with forecasts. Month-on-month inflation dropped by 0.02%, compared with the 0.08% rise seen previously and against expectations of a 0.05% increase. Annual core inflation accelerated slightly to 4.66%, from 4.61%, slightly below consensus of +4.67%.
Tim Condon from ING comments: “Inflation is among the highest in Asia thanks to last June’s fuel price hike. We expect it to slow to 5% in June and to remain there in the second half of the year. This would put the full-year average at 5.7% to which we now revise our forecast from 5.5%.”
Indonesian trade surplus widened to $0.67B in March from $0.79B in February, against forecasts of narrowing to $0.50B. Exports grew 1.24%, following a 2.96% decrease (vs 1.30% exp.), while Imports fell 2.34%, up from -9.98% (vs -4.50% exp.).
“Despite the improvement in March trade data, concerns remain on the external front,” Euben Paracuelles and Lavanya Venkateswaran, Research analysts at Nomura warn. “The key drivers of exports (namely oil and gas and agriculture) are still subject to poor terms of trade, while imports of oil and gas have started to rise and will likely continue to do so absent any subsidy reforms this year.”
“In addition, the current account deficit remained above what BI views as the sustainable level of 2% of GDP, with the CAD likely to widen further in Q2, partly on seasonal factors. Lastly, with the slowdown of FDI inflows increasingly a concern, improving the quality of financing the CAD should remain challenging.”
Technicals
The South Korean won was the best performer among Asian currencies this week, hitting a five-year high after the release of better than expected trade balance and CPI data and on hopes of the US Fed keeping rates low. It climbed 1% to 1031.07 against the greenback since April 25.
At the moment of writing the USD/KRW was down by 0.24% at 1030.19. On Thursday the pair's daily FXStreet Trend Index was strongly bearish, with the OB/OS Index neutral. RSI was at 33 at the last close, and has risen to 37 so far today. The 1D 200 SMA was at 1,071.68, while the 1D 20 EMA was at 1,041.69.
Other strong performing Asian currencies this week include the Indian rupee which rose by 0.7% to 60.2025 per dollar, the Taiwanese dollar increased 0.5% to 30.179 and the Philippine peso grew by 0.2% to 44.555.
On Thursday Indonesia also published inflation and trade balance numbers. On an annual basis CPI growth slowed down to 7.25% in April from 7.32% in March, in line with forecasts. Month-on-month inflation dropped by 0.02%, compared with the 0.08% rise seen previously and against expectations of a 0.05% increase. Annual core inflation accelerated slightly to 4.66%, from 4.61%, slightly below consensus of +4.67%.
Tim Condon from ING comments: “Inflation is among the highest in Asia thanks to last June’s fuel price hike. We expect it to slow to 5% in June and to remain there in the second half of the year. This would put the full-year average at 5.7% to which we now revise our forecast from 5.5%.”
Indonesian trade surplus widened to $0.67B in March from $0.79B in February, against forecasts of narrowing to $0.50B. Exports grew 1.24%, following a 2.96% decrease (vs 1.30% exp.), while Imports fell 2.34%, up from -9.98% (vs -4.50% exp.).
“Despite the improvement in March trade data, concerns remain on the external front,” Euben Paracuelles and Lavanya Venkateswaran, Research analysts at Nomura warn. “The key drivers of exports (namely oil and gas and agriculture) are still subject to poor terms of trade, while imports of oil and gas have started to rise and will likely continue to do so absent any subsidy reforms this year.”
“In addition, the current account deficit remained above what BI views as the sustainable level of 2% of GDP, with the CAD likely to widen further in Q2, partly on seasonal factors. Lastly, with the slowdown of FDI inflows increasingly a concern, improving the quality of financing the CAD should remain challenging.”
Technicals
The South Korean won was the best performer among Asian currencies this week, hitting a five-year high after the release of better than expected trade balance and CPI data and on hopes of the US Fed keeping rates low. It climbed 1% to 1031.07 against the greenback since April 25.
At the moment of writing the USD/KRW was down by 0.24% at 1030.19. On Thursday the pair's daily FXStreet Trend Index was strongly bearish, with the OB/OS Index neutral. RSI was at 33 at the last close, and has risen to 37 so far today. The 1D 200 SMA was at 1,071.68, while the 1D 20 EMA was at 1,041.69.
Other strong performing Asian currencies this week include the Indian rupee which rose by 0.7% to 60.2025 per dollar, the Taiwanese dollar increased 0.5% to 30.179 and the Philippine peso grew by 0.2% to 44.555.