Oil
After registering a four year high on the back of a slow down in U.S. drilling that compounded supply losses from Iran and Venezuela. Oil prices consolidated gains throughout most the Asia session, but with the USD looking poised to move through Asia currencies like a wrecking ball, oil prices have come off the boil on waning risk sentiment.
Rupee and Oil
There is some concern a weaker INR could weigh on India’s oil demand. But as we move towards the USDINR 74, it could be catastrophically destabilising for India capital markets as India would have increased problems servicing their US dollar-denominated debt. While the direct currency impact of a weaker INR to Oil demand remains debatable, what’s not, is a possible capital market meltdown in India that will undoubtedly hurt oil demand.
Gold
After trading a bit higher on waning risk sentiment, with the dollar reasserting itself as king of the hill, gold ran into a wave of sellers at $1194, and the yellow metal is heading south again
Asia equities
A word of caution as liquidity, due to Golden Week is running extremely thin which could be contributing to some outsized moves
Wow, that was a quick turnaround as Asia equities bled a sea of red (HSI -1.850%, TWSE -1.25%, KOSPI -1.10%) as a toxic elixir of weaker China PMI, stronger USD and escalating geopolitical tension in the South China Sea when a Chinese destroyer came within meters of ramming USS Decatur. So much for the USMCA euphoria, indeed that fizzled quickly.
EM Asia currencies in focus
Indonesian Rupiah
USD Asia traded higher across the board, but there was an outsized focus on the IDR which breached the psychological USDIDR 15,000 level, and now vols are getting paid aggressively across the weaker links of the ASEAN currency chain. (IDR-PHP-INR) Those that fell for the intervention and higher interest rate “dangling the carrot” are running for the exits en masse
Korean Won
Korean won weakened as the services and investments sectors data remained tepid and triggered a reported 200 million in equity outflows
Singapore Dollar
The SGD weekend following its Asian peers and we could expect more weakness as short dollar positions get pared ahead of MAS
G-10 currencies in focus
Euro
The USD the dollar is back in the driver’s seat after Claudio Borghi suggested: “Italy would have solved fiscal problems with its currency.” The market was not short near enough Euro, and traders have relentlessly hammered the single unit to the psychologically significant 1.1500 level
Australian Dollar
RBA seemed to be a non-event in the first, but the AUD has traded lower as ASEAN risk has evaporated. But perhaps there were more misguided positions heading into today’s rate announcement possibly hoping for a hawkish flash in the statement, that may be unwinding and contributing to a more significant sell-off than one would have expected.
