With the US out for Thanksgiving, currency moves were largely muted except for the RMB. USD/CNH defied a stronger USD to ease towards 7.14, after China set a stronger CNY fixing for the fourth consecutive day yesterday. RMB is also benefiting from greater investor confidence over US-China bilateral relations following the Biden-Xi summit. On top of that, China is reportedly planning a package of financing measures to support developers, such as allowing banks to offer unsecured working capital loans. If realized, these measures could bolster domestic confidence in the housing market, alleviate credit risks, and reassure suppliers and workers that project completion is paramount.
Across the straits, Taiwan’s mainland-friendly opposition parties failed to agree on a unity ticket after talks on Thursday between KMT’s Hou, TPP’s Ko, and independent candidate Gou. It now appears unlikely that consensus can be reached before the candidate registration deadline today, and this could disappoint investors hoping for a potential easing in cross-straits tensions. Chinese asset market sentiment could dampen somewhat today.
USD/JPY is consolidating around mid-149 levels,supported by a pare back of 2024 Fed rate cut expectations after inflation expectations surprisingly rose in the University of Michigan survey. Meanwhile, Japan’s headline inflation rose to 3.3% y/y in Oct (prev: 3.0%), while core-core inflation dipped to 4.0% y/y (prev: 4.2%). Given a moderation in underlying core price pressures, another BOJ policy tweak may not happen soon. US rates volatility is still the major driver of USD/JPY moves for now, and USD/JPY may ease towards 149 again if US PMIs today indicate a moderation in momentum.
USD/KRW has rebounded back towards 1300, after dipping below 1290 earlier this week. Tensions across the Korean peninsula have suddenly ratcheted up, following North Korea’s launch of a spy satellite on Tuesday. South Korea is suspending part of a 2018 military accords, while North Korea also said yesterday that it would deploy stronger armed forces and new weapons at its southern border. Geopolitical tensions in Korea are not new, but they could keep a check on KRW gains for the time being.
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