NJA: MAS and BoK in focus

USDAsia crosses have pulled back sharply over the past week, following a disappointing US payrolls report, FOMC minutes signaling patience, and continued recovery in risky assets. YTD underperformers such as IDR and MYR have rebounded most strongly in this broad USD-EM retracement. It is believed that factors such as China's slowdown, CNY depreciation and additional BoJ easing and ECB would likely support the USD over the medium term. In the near term, USDAsia could remain choppy due to an unwinding of outstanding positions amid poorer market liquidity. 

Two central bank meetings will bear significance for currencies. On Wednesday (14 October), the Monetary Authority of Singapore (MAS) will hold its semi-annual policy review meeting. MAS is likely to keep the SGD NEER band unchanged, although this is increasingly a close call. 

"We recommended buying 1m USD call SGD put RKO option ahead of the meeting", says Barclays.

In Korea, the BoK is expected to cut rates, although consensus expectation is for policy to be unchanged (Thursday). Korea is particularly vulnerability to China's slowdown, while BoJ easing in October adds new risks for the KRW given the close economic competition and currency correlation between the two countries. In Indonesia, BI is expected to remain on hold (Thursday).

In terms of data releases, this week's focus will be on China's trade (Tuesday) and inflation (Wednesday) for September. The contractions in China's exports (last: -5.5%) and imports (last: -13.8%) is expected to have widened. CPI is likely to edge down on lower food prices (last: 2%), and PPI deflation is likely to narrow (Barclays: -5.7%; last: -5.9%). 

In India, the CPI inflation print is expected to rise nearly 100bp as favourable base effects fade (Monday; last 3.7%). IP growth will likely remain sluggish at 4% y/y, as weak external demand and lower oil prices continue to weigh on export growth. India's trade balance is, however, expected to improve (last: -USD12.5bn) as gold imports slow after an August spike.