The week ahead should be an interesting one for Asian financial markets, with the highlights being China’s 19th National Congress, the latest numbers for Chinese economic growth, the Bank of Korea’s monetary policy meeting and Japanese trade data.
Further to that, and to the events outlined below, investors should look with care to Federal Reserve speakers on Sunday and Wednesday (Asian time zones) and to Tuesday’s US data for industrial production, all of which may influence risk appetite and, of course, the dollar side of Asian FX pairs.
Chinese Yuan
Wednesday is a big day in politics in China; that being the day of the 19th National Congress of the ruling Communist Party. At the event, which takes place once every five years, changes will likely be made to China’s top leadership positions and with this in mind, analysts expect the yuan to be stable heading into Wednesday’s session.
On Monday, ahead of the Congress, investors will get to see the latest Chinese inflation data. Consumer prices are expected to have grown in the year to September by 1.6%, from 1.8% previously.
The most important Chinese data comes on Thursday however, in the form of GDP. The world’s second largest economy is forecast to have grown by 6.8% in the past year, from June’s annualized rate of 6.9%.
Offshore yuan strengthened by 1.3% against the dollar last week, forcing USD/CNH down to 6.5677.
Thai Baht
USD/THB's 1.1% fall last week to 33.055 took the pair to within a whisker of the major technical support level of 33.0. A move below 33.0, even momentarily, looks inevitable this week and would take the baht to its strongest level against the dollar since April 2015.
Speaking on the baht this weekend, Bank of Thailand governor Veerathai Santiprabhob said that he “would not want to see the currency moving out of sync with…regional trading partners,” because this would negatively impact Thai exporters.
Japanese Yen
USD/JPY has spent the past six months trapped between 108 and 114, and last week’s 0.7% decline in the pair to 111.82 took it back into the middle third of this range.
Trade data for Japan will be in the spotlight on Wednesday. Both imports and exports are expected to have grown by double figures in the year to September, although both at a slightly slower pace than that seen in last month’s data.
Yen volatility may pick up this week ahead of Sunday’s general election, which pits incumbent Prime Minster Shinzo Abe against popular Tokyo governor Yuriko Koike. Most analysts believe that an Abe victory will make it more likely that the Bank of Japan persists with extremely stimulative monetary policy – which currently includes quantitative easing and negative interest rates – and would therefore be supportive of higher USD/JPY rates.
Singapore Dollar
The Singapore dollar strengthened by 1.1% against its US counterpart last week, assisted by Friday’s robust GDP data.
USD/SGD fell back below 1.35 (to 1.3493) for the first time this month after Singapore’s Ministry of Trade and Industry released preliminary data showing the economy expanding at an annualized rate of 4.6% – Singapore’s highest rate of growth since 2014.
Singapore dollar bulls will now be hoping for another attack on 1.3350 – the major support level in USD/SGD. Previous attempts on the level failed in April, June and August of 2016 and again five weeks ago.
Non-petro trade data, released on Tuesday, is expected to show a slight decline in Singapore’s exports in September but double-figure growth on an annual basis.
South Korean Won
The Bank of Korea will announce its latest decision on interest rates on Thursday. Rates have been held at a record low of 1.25% since June 2016 and no change is expected this week.
While higher interest rates are almost certainly in the making in Seoul, elevated levels of household debt and the ever-present problem of North Korea have muddied the waters for the BoK.
Last week’s strength in the won pushed USD/KRW down 1.1% to a three-and-a-half-week low (won high) of 1129.
Philippine Peso
With almost nothing on this week’s economic calendar for the Philippines, movement in the peso will be driven by speakers from the US Federal Reserve, who are most likely to impact broad market sentiment. Speakers include Fed Chairwoman Janet Yellen on Sunday and regional Fed presidents Harker, Kaplan and Dudley on Wednesday.
Holders of pesos were left disappointed last week as the currency failed to appreciate along with its peers. The peso was virtually unchanged on the week against the dollar, settling at 51.14.
The peso remains at historically weak levels. In August, the currency fell against the dollar to an eleven-year low (USD/PHP high) of 51.66.
Indian Rupee
The Indian economic calendar, like that of the Philippines, is sparsely populated this week, which leaves the rupee to fluctuate on changes in broad market sentiment and on the relative hawkishness or dovishness of upcoming Fed speakers.
USD/INR fell (the rupee rose) 1.2% last week to 64.77. Major support and resistance in the rate exists at 63.50-64.0 and 69.0 respectively.