Asia FX: Tech-led risk aversion puts currencies under pressure ahead of NFP – MUFG

Asia FX has come under pressure from the recent technology-led equity sell-off, with support from lower oil prices and US yields being offset, according to MUFG analysts Khang Sek Lee and Lin Li. Demand for safe-haven assets has strengthened the Dollar and Japanese Yen. The forthcoming US Nonfarm Payrolls report could bolster expectations of additional Fed tightening, putting further pressure on Asia FX, especially technology-sensitive currencies such as TWD and KRW.

Can regional currencies withstand weaker risk sentiment?

"For Asia FX, the sharp deterioration in risk sentiment threatens to outweigh the relief from lower oil prices and US yields in Asia’s trading session today, especially for tech-sensitive currencies such as TWD and KRW."

"Amidst the risk-off episode, the dollar has regained some ground with the DXY rising towards 101.6 as investors sought safe-haven assets."

"Attention turns to today’s US nonfarm payrolls report, with markets expecting 70k jobs added in October, up from 29k in September."

"Stronger-than-expected JOLTS and ADP data suggest a better-than-expected US labour demand, raising the risk of further Fed tightening, adding another source of pressure for Asia FX."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)