Asian EM Currency Update

The US dollar is consolidating its post jobs loss against the major currencies, but it softened against most of the Asian currencies. The notable exceptions were the Singapore dollar and Philippine peso, both of which slipped ever so slightly. most of the Asian currencies. The notable exceptions were the Singapore dollar and Philippine peso, both of which slipped ever so slightly.

The Taiwanese dollar was the strongest, gaining a little more than 0.2% against the dollar. Foreign investors continued to purchase Taiwanese shares and with today's almost $170 mln of purchases, brings the month-to-date figure to almost $950 mln. This is on top of the nearly $2 bln in the Jan-July period. Taiwan reported a larger than expected July trade balance of $2.16 bln compared with $1.41 bln in June and expectations for a $1.35 bln surplus. Imports and exports were stronger than expected, with exports rising 38.5% from a year ago vs 34.1% in June. Imports are 42.7% above year ago levels vs 40.4% in June.

The Thai baht is rivaling the Taiwanese dollar today and is also up about 0.2% against the greenback. The central bank opined today that while the baht's recent rise has ben a bit too fast (~1% over the past month), its rise is unavoidable. Foreign investors have been net sellers of Thai equities in the first seven months of the year, but have turned to the buy side this month. The $207 mln purchases leaves the year-to-date liquidation at about $117 mln. For the record, Thailand's equity market is up 19.1% this year and is the second best performer in the region behind Indonesia thus from this year.

The Korean won eked out a modest gain (0.15%) against the dollar. Here the magnitude the magnitude may not be as important as the level. For the first time since the middle of May, the won is above its 200 day moving average (comes in around KRW1163.30 today). Of note producer prices roser at a 3.4% pace in July down from 4.6% in June. Given what is happened to food prices, it is not clear that this will be sustained Nevertheless the central bank meets at mid-week and is not expected to change the policy rate, which current stands at 5%.

The Malaysian ringgit strengthed modestly as well. Here to the level is more noteworthy than the magnitude. Today the MYR is trading at new highs for this year and last and is at its best level since mid-08. Market talk suggest that some leveraged accounts see it as a useful proxy for the Chinese yuan. Year-to-date it is the best performing currency in the region, appreciating a little more than 9% against the dollar. Malaysia reports June industrial output tomorrow. The consensus expects a moderation to 11.5% from 12.5% in May. Next week (Aug 18) it reports Q2 GDP, which is expected to moderate from the 10.1% pace (year-over-year) seen in Q1. It reports July CPI the same day. Malaysia's CPI has been steadily marching higher all year (hence the tightening of policy). The year-over-year rate in June was 1.7%, a 13-month high.