EM ASIA CREDIT: Indonesia plans commodity firms keep foreign fx profits on shore

J.P Morgan: "USD is ending December on a strong note even before tariff risks have crystallized, defying usual seasonal patterns on a mix of positive growth (flash PMIs) and yield (Fed vs. BoJ / BoE / Norges Bank) divergences this week.
The less dovish Fed posture unveiled at the December FOMC can continue to reverberate bullishly for the dollar through early’25, as markets anticipate additional follow-through shifts on core PCE upgrades in Trump 2.0, and potentially even question the longevity of the easing cycle.
The surprisingly dovish December BoJ MPM biases risks towards later and more gradual monetary policy normalization in 2025 than our baseline. FX markets are on heightened intervention watch however that may forestall an extrapolation of the outsized BoJ day USD/JPY strength. Continue to hold cross-Yen shorts.

One artefact of DM central bank divergence is that G10 FX carry (USD,GBP vs. CHF, JPY) is back in vogue, having reversed nearly all of its July drawdown. With yield dispersion still holding in around historical highs, rotation into value may have to wait.
Trades: Stay long USD & short EUR as the election trade is not finished. Other macro themes include services/mfg r.v., policy r.v., EUR-specific weakness, flows r.v. and ongoing carry rotation. Short EUR vs USD, JPY, CHF, Scandis. Long NOK vs SEK, GBP, PLN. Short CHF/JPY, hold CAD/JPY put spread.

The last liquid trading week of the year proved to be a statement week for the USD. A packed calendar of top-tier economic data and central bank events culminated in a 1%+ DXY rally on the week, with the dollar blanking every G10 and EM comer in sight. The drivers were straightforwardly cyclical — continued signs of US growth exceptionalism on flash PMIs, buttressed by classical G4 monetary divergence (hawkish Fed vs. dovish BoJ /BoE) — that turned out to be the polar opposite of the (weak) data / (dovish Fed) policy inflections responsible for outsized late 4Q dollar sell-offs in recent years; no surprise then that seasonal dollar weakness in December has not come to pass this year, and goes to show that price seasonality, unless driven by recurring seasonal BoP flows, is often just a coincidental artefact of macro circumstances."

JGB futures rest at 142.45, -.02 versus settlement levels at the Monday lunchtime break. Ranges have been fairly narrow in the first part of Monday trade (142.41-142.63). US TSY futures are also close to unchanged in the first part of Monday trade. 

• Broadly we sit within Dec ranges to date. Post BoJ highs for the March future rest 142.72. Recent lows were at 141.87, post the hawkish Fed cut earlier last week.
• Technicals for JGB futures still point south for JGB futures, with eyes on a break sub last week's lows.
• In the cash JGB space, yields are little changed in the first part of Monday dealing. The 10yr is up around 1.07% levels, off post BoJ lows (near 1.04%), but still seeing upside resistance above 1.10%. Swap yields are a touch higher.
• The data calendar is largely empty until the services PPI prints on Christmas day. BoJ Governor Ueda also delivers a speech that day. 

• Despite efforts last week to halt the move lower in yields, China’ s bond yields dropped in this morning’s trading.
• CGB 10YR has fallen 3bps in early trading to be at 1.689%.
• The 10YR breached the 2.00% in early trading December and has progressively moved lower since.
• There are expectations that in the new year the authorities will reduced monetary policy and make RRR cuts to support the economy.