The market isn't clear on what to make of the latest political development in the U.S. and this could increase uncertainty and therefore weigh on risk.
Yuan and ASEAN currencies
USD/CNH had a shallow dip after Bloomberg reported that China is said to be planning to buy more U.S. pork. Spot then reversed and broke above 7.1200 as the market may have been caught short the dollar and end up covering positions.
Immediate resistance is at 7.1250-1300 ahead of 7.15/16, while support lies at 7.0950
Despite several goodwill trade gestures some doubt is starting to sink in that a trade truce alone might not be enough to shift the weaker Asia FX currency tide.
So, Traders remain buyers of USD on dips hedging against the more significant tail risk, a break down in trade talks. Indeed, A complete breakdown in trade talks could weaken the yuan and the local currencies like the Malaysian Ringgit significantly.
Also, the lack of Chinese easing continues to weigh on regional growth and equity sentiment, which hardly provides an inspiring backdrop to buy the yuan or other Asian currencies for that matter.
Malaysia's consumer price index rose 1.5% in August from a year earlier, marginally faster than the previous month.
Bank of Thailand
As expected, the Bank of Thailand (BoT) kept its policy rate on hold, but the vote was unanimous, and they surprisingly suggested monetary policy remains accommodative. The statement was much less dovish than expected, especially in the face of slowing growth and a strengthening Bhat.
However, The BoT continues to express concerns that the baht’s strength relative to trading partners' currencies which suggests they could remain on an easing bias.
I expect the market to buy the pair on further dips given current positioning.
Oil
Oil markets continue to sell as risk sentiment remains sour after Trump accused China of currency manipulation, theft of intellectual property and product dumping. Mind you this is nothing shockingly new but coming on the cusp of trade negotiations, it doesn’t exactly suggest he’s laying down the welcome mat for the Chinese delegation.