NJA and AUD: USD-Asia crosses moving higher across the board

USD-Asia crosses have pushed higher over the past two weeks after Fed Chairman Yellen signalled that the FOMC is likely to raise rates later this year. USDKRW, USDSGD and USDTHB have led the move higher in region, and now the previously lagging currency pairs like USDTWD, USDIDR and USDMYR have started to move out of their consolidation ranges of the past one month. 

Barclays notes:

We expect the strong USD trend to persist, especially with the lack of a convincing turn in economic activity in Asia. Korea's Q2 GDP print surprised to the downside last week, and this week's July exports print for Korea (Saturday 1 August) is likely to worsen to -7.5%y/y from -1.8% previously, adding to negative sentiments to the KRW. Korea's June IP (Friday) is also likely to remain in contraction on a y/y basis (Barclays: -0.5%; last: -2.8%). 

In Taiwan, we expect Q2 GDP (Friday) to slow to 3.0%y/y from 3.4% in Q1, given weak exports and IP of late. Thailand's manufacturing output and exports for June (Monday) are likely to show negative prints (y/y basis), weighed by poor demand from China. We expect China's Official PMI for July (Saturday) to edge up to 50.4 from 50.2 with some signs of improved trade momentum, but the unexpected drop in the Markit 'flash' PMI raises the risk of disappointment which would add further pressures on commodity currencies like the AUD. That said, technicals show currency pairs like USDKRW and USDTHB are currently in short-term overbought territory, and thus a temporary pullback may be possible even if macro data continues to disappoint. However, we think that the USD would stay strong over the course of H2.