Falling oil prices have dampened local market sentiment, and despite falling US yields overnight the USD remained solid outside of JPY motioning a market shift to risk aversion
When oil prices decline they have a negative pass through to regional currencies and with the greenback carving out gains against the broader G-10 landscape, local currencies should fall out of favour near-term
The MSCI inclusion of A-shares should provide a longer term boost to local markets, and the incision is structured such that there’s a huge incentive for China to keep reforms on track so that the participation weights will broaden as more reforms get introduced. Long term this should provide capital inflow to the mainland and reduce pressure on the RMB complex. Reports t of sporadic currency interventions at yesterday’s close on the CNY has helped Yuan sentiment, but strong dollar narrative continues to carry the day.
North Korea headlines are creating a risk ripple after South Korea’s military said a drone found earlier this month on a mountain near the Demilitarized Zone border was confirmed to have been from North Korea and described it as a “grave provocation.” Also, the fallout from the Warmbier tragedy is more likely to gather pace as President Trump pulled few punches on his condemnation of North Korea.
The Ringgit continues to tarnish on the weaker oil price narrative and the hawkish Fed storyline.