A strong payroll report may bring back correlations, the investors in Asia should position for an upside surprise to US payrolls as the risk in terms of potential market reaction is asymmetric.

There is little room for a meaningful drop in US Fed funds expectations simply because the curve is not factoring in much.

The disappointing private sector job report did not help to raise this expectation.  

A strong payroll report may bring back correlations between Asian rates and USD rates, which have been weak recently.

Other Asian currencies: Should the prospects for Fed tightening rise, HKD rates and KRW rates are likely to follow movement in USD rates more, while upside to SGD rates and INR rates will be amplified through the FX channel.

Short SGD-INR 1m, SGD-INR cross is trading close to the top-end of the 2-year range.

SGD NEER has started trading in the upper half of the band although MAS eased SGD NEER appreciation path to neutral last week and Singapore data remains poor.

The INR should outperform on improved sentiment after the rate cut from RBI and revised liquidity framework and better monsoon expectations.