USDAsia pullback likely temporary

Fed kept rates on hold, the prospect of higher US rates has become less of an issue at this stage for EM Asia, while risks of a sharper slowdown in China and larger CNY depreciation have become increasingly important negative factors, particularly for currencies more closely tied to China's growth, such as the KRW and TWD. 

"Any rebound in Asian currencies should be seen as opportunities to reinstate long USD positions. The USD may retrace further in the very short term, but remaining bullish is recommended over the medium term. The CNY, KRW, TWD and THB are least likely to benefit from a short-term USD retracement", says Barclays. 

Our long-held INR outperformance view remains unchanged, while authorities are likely more willing to accept a temporary rebound in MYR and IDR than in Korea or Taiwan.

"In terms of data, China's Caixin flash PMI is expected to edge up slightly to 47.5 from its August low (47.3) due to a resumption in economic activity. August industrial production for Taiwan, Singapore and Thailand are all expected to remain in contraction on a y/y basis due to weak China and EM growth", added Barclays. 

Philippines and Taiwan central banks are both expected to keep rates unchanged, but the latter could turn more dovish, given recent poor outcomes for exports and growth.