Asian currencies likely to outperform against EUR

Activity data this week will likely continue to paint a challenging growth picture for the region, with trade and activity growth figures stabilizing at low levels. However, with China seemingly determined to intervene to hold the CNY stable and narrow the CNH-CNY spot gap ahead of the SDR review, Asian currencies have held up relatively well over the past week, despite EUR weakness, a currency to which Asian FX has traditionally being highly correlated. 

Scope for Asian currencies are seen to outperform versus the EUR in the coming weeks, as the market sees renewed interest in using the EUR as funding currency in anticipation of QE extension and a deposit rate cut, foresees Barclays.

In terms of data releases, it will be a heavy weak for Asia. China's Caixin manufacturing PMIs  will provide a gauge of October activity; a pickup is expected. Indonesia is scheduled to release Q3 GDP, and we forecast growth of 4.9% y/y. 

"We also look for further weakening in Korean exports in October. We expect the Bank of Thailand (Wednesday) and Bank Negara Malaysia (Thursday) to stay on hold", says Barclays.