Asia FX Weekly Focus on China data and US CPI

Focus on China data and US CPI

LIN LI, PhD Head of Global Markets Research Asia Asia’s data calendar will be led by China, where the combination of trade, inflation Global Markets Research and credit figures should highlight the economy’s increasingly uneven growth mix. Global Markets Division for Asia August exports are expected to remain strong, supported by global demand for E: AI-related hardware. CPI and PPI inflation could edge slightly higher, partly reflecting energy costs, AI-equipment prices and summer travel demand. In MICHAEL WAN contrast, aggregate financing and new lending are likely to remain weak as Senior Currency Analyst subdued household and corporate borrowing offsets relatively resilient Global Markets Research government bond issuance. Taken together, the releases may reinforce the Global Markets Division for Asia divergence between China’s export-oriented sectors and still-soft domestic E: demand. We continue to expect gradual appreciation in CNY, given strong trade surpluses, exporter conversion, and coupled with the general FX policy direction LLOYD CHAN by Chinese authorities. Senior Currency Analyst Elsewhere, Thailand’s CPI is expected to rise on food and fuel costs but remain Global Markets Research within the central bank’s target band, while Malaysia’s industrial production, Global Markets Division for Asia Singapore retail sales, Taiwan’s trade and inflation data, and South Korea’s GDP E: and labour-market releases will provide additional signals on regional activity. KHANG SEK LEE Among these markets, we see the Bank of Korea remaining hawkish and the Associate GDP numbers should validate that, with some chance also that Taiwan’s central bank may communicate a more hawkish message moving forward. Meanwhile, Global Markets Research we expect Bank of Thailand to keep rates accommodative at 1% for some time, Global Markets Division for Asia and this should continue to anchor the front-end of the THB rates curve. E: Outside of Asia, the most important global catalyst is the US August CPI inflation out on 11 September, which comes ahead of the FOMC policy meeting on 16 September. The US CPI inflation print has taken on increasing salience in the near-term, in part from the broader shift by Fed Chair Kevin Warsh to move away from explicit forward guidance – and as such also greater data dependence – and also from Fed Governor Waller’s speech placing meaningful weight on this 04 September 2026 datapoint in guiding how he will vote in September. We will also have the ECB policy decision, where consensus and ourselves are expecting a 25bps hike, while in Japan, July labour cash earnings, revised MUFG Bank, Ltd. second-quarter GDP, coupled with BOJ Board Member Kazuyuki Masu’s speech A member of MUFG, a global financial group could be important catalysts for the market.

THE BIG MOVES IN GLOBAL FX MARKETS WAS A SHARP STRENGTHENING IN THE JAPANESE YEN COUPLED WITH SOME DOLLAR WEAKNESS Index Dollar Index USD/JPY

↓Weaker US Dollar, Stronger Japanese Yen Jan-24 Jun-24 Nov-24 Apr-25 Sep-25 Feb-26 Jul-26

FX views There were significant moves in the FX market this past week, with the Japanese yen in particular strengthening sharply from the 160 level on 2 Sep all the way down to as low as 155.30, close to a 5 big figure move. Japan’s top currency official Atushi Mimura did not comment whether authorities had conducted a rate check but said that Japan remains on alert over currency market developments, and warning that he was not yet comfortable with recent moves in the Yen. What also helped push the Dollar weaker and JPY and Asia FX stronger was Governor Waller’s speech. Fed Governor Waller said he is inclined to leave interest rates unchanged as long as inflation continues to slow. In particular, he placed quite a lot of weight on the upcoming August inflation data much more so than labour market numbers, said he was leaning towards a rate hold in the September meeting, while also saying it might not take much acceleration in inflation to nudge him towards supporting tighter policy. Overall, these views and developments fit in with our global teams’ views that pricing for Fed hike rate expectations are too…