In our view, this week will continue to be risk on sentiment in Asia. Tomorrow, China October PMI may print 52 vs. BBG 51.8 and September 51.2.
Our leading indicator analysis suggests that China Q4 11 GDP will rise to 9.3-9.5% y/y versus 9.1% in Q3 11.
No changes in our views. We are outright bullish on KRW, IDR, and SGD. INR and CNH/CNY will under-perform these currencies. For details or our forecasts, please refer to out October 28, 2011 report Asia FX: we are outright bullish.
We don’t rule out short-term and short-lived upside risks to USDAsia on back of some Europe related negative headlines. However, we would fade these up moves.
Our Q4 11 USDKRW target is 1060. Our leading indicator for Korea suggests a continued pickup in growth and today’s positive September IP print bodes well for this view. As a result, the BoP will improve in the next set of data releases for Korea. In the next 1 week, our risk reversal model suggests USDKRW at around 1089.
USDIDR has lagged among the high beta currencies in Asia so far and we expect this pair to start moving within the next 2 weeks, our Q4 11 target is 8500. I was in Indonesia last week and the outlook for growth and the BoP is very positive. Our 1-2 week USDIDR view is 8750.
Should inflation surprise high, BI will let USDIDR drop significantly to temper inflation expectations and use the interest rate policy tool much more conservatively in our view.
Our USDSGD Q4 11 target is 1.20 and predicated partially on our strengthening views on EURUSD. Our 1-2 week view on USDSGD is 1.235.
The main focus this week for Asian markets, besides China October PMI, will be US October ISM tomorrow, FOMC Wednesday, ECB mpc and G20 meetings on Thursday, and Friday US October non-farm payrolls.
The risks to US data are tilted to the upside in our view. The risks are tilted towards the G20 announcing a more comprehensive set of policies to ring fence peripheral Europe fiscal risks in our view.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/10/AsiaFlashOctober312011.pdf
Skandinaviska Enskilda Banken AB