ASIA FX: USD/CNY Higher After LNY Break, Spot KRW & TWD Follow Firmer Yen

FX trends have been mixed in the first part of Monday trade. The USD indices sit down a touch, off earlier highs, with JPY and CHF underperforming other G10 currencies. The BBDXY index was last just under 1312, still within striking distance of recent cycle highs above 1316.

• USD/JPY has firmed but hasn't tested above 158.00. We were last near 157.70/75, around 0.30% weaker in yen terms. USD/CHF was close to 0.9100.
• US yields have firmed, following on from recent US data beats and cautious Fed commentary around the inflation outlook. We are away from best levels from a yield standpoint, up a little over 1.5bps at the back end of the curve. The 10yr at 4.61% is short of late 2024 highs near 4.64%.
• Comments from BoJ Governor Ueda crossed the wires earlier. The were consistent with remarks from late Dec, around the timing of the next rate move is dependent on the growth/inflation outlook and wages are a key variable.   
• We had final PMI reads for the Japan and Australian PMIs (services) but they didn't shift sentiment. China's Caixin services PMI printed stronger than forecast, but also didn't shift sentiment greatly. Regional equity trends are mixed.
• AUD and NZD sit higher, but still close to recent lows. AUD/USD around 0.6225, while NZD/USD is in the 0.5620/25 region.
• EUR/USD has been supported sub 1.0300.
• CAD is around 0.30% firmer, with USD/CAD last near 1.4400. Session lows in the pair were at 1.4388. Support for CAD was evident post local news wire headlines that PM Trudeau may resign this week ahead of a caucus meeting on Wednesday.
• Later the Fed’s Cook speaks. US & European December services/composite PMIs and preliminary December German CPI data are released.

ACGBs (YM -7.0 & XM -7.5) are cheaper after extending weakness induced by US tsys’ heavy close on Friday. This movement aligns with today's Asia-Pac session, where cash US tsys are 1-2bps cheaper, showing a slight steepening bias.

• Cash ACGBs are 7-12bps cheaper, with the 5-year underperforming. The AU-US 10-year yield differential is at -16bps.
• Outside of the previously outlined S&P Global Dec. PMIs, there hasn't been much by way of domestic drivers to flag.
• Swap rates are 6-7bps higher.
• The bills strip is showing -3 to -6 across contracts.
• RBA-dated OIS pricing is flat to 6bps firmer across meetings. A 25bp rate cut is more than fully priced by April (114%), with a February cut at a 57% chance.
• Tomorrow, the local calendar will see Building Approvals data. However, the highlights of the week are likely to be November CPI on Wednesday and retail sales on Thursday.
• November CPI is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting headline to pickup 0.1pp to 2.2%. Trimmed mean was 3.5% the previous month.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.

Asian stock trends are mixed in the first part of Monday trade. Japan markets have returned after a 3 day break and are tracking lower. The major indices off over 1% at this stage. Electronics are autos are underperforming post the break. The positives have been in tech focused plays, with South Korea and Taiwan outperforming. 

• China and Hong Kong markets have been mixed, but sit weaker at the break, albeit only modestly. The better than expected Caixin services PMI print did little to lift sentiment. Markets are waiting fresh stimulus details, with the PBoC stating it will cut the RRR and interest rates at an appropriate time.
• The CSI 300 is sub 3800, the HSI still under 20000.
• The Taiex is up 2.65% to 23500 in Taiwan, while the Kospi is up over 1.5%. In US trade on Friday the SOX surged over 3%. Positive investment commitments from Microsoft is aiding sentiment in the tech related space.
• Other markets are showing more mixed trends, but aggregate moves remain modest.