US CPI & yields and China data to drive regional FX marketsAsia FX Weekly

Key arguments

• Asia FX direction hinges mainly on US CPI, US Treasury yields and China growth data; domestic fundamentals take a back seat.
• A softer US CPI and lower yields would support higher-yielding Asian currencies and stem foreign equity outflows; an upside surprise would boost USD.
• MUFG expects USD/IDR to stay cautious, with 18,000 the key technical resistance and support at 17,800-17,850, despite cheap valuations.
• USD/INR likely remains supported, with RBI intervention limiting an abrupt move beyond the recent 96.32-96.84 range.

Corresponding source evidence

1. 1 Asia FX Weekly US CPI US CPI & yields and China data to drive regional FX markets Asia FX is likely to trade with a cautious tone in the week ahead, with currency performance driven primarily by US inflation data, movements in US Treasury yields and developments in China’s growth outlook.
2. A softer -than-expected US CPI print could reinforce expectations for further Fed easing and provide support for higher-yielding Asian currencies, while any upside inflation surprise would likely boost the USD and weigh on regional FX.
3. Meanwhile, Asia FX remains sensitive to the interaction between domestic policy expectations and US yields, while oil price movements and broader geopolitical developments will continue to influence external balances and risk sentiment across the region.