US dollar was
in consolidation mode on the back of weaker Chinese data and deflationary
fears following the sharp plunged in copper prices. The increased demand
for safe assets pushed the yield of the 10-year US Treasuries down to
2.64%, from last Friday's peak of 2.82% and saw broad sell down in global
equities while investing community dumped the US equities. The improvement
in US macro data flows didn’t support risk sentiments well. Retailers
reported a 0.3% month-on-month increase in February – the first jump in the
last 3 months while the initial job claims fell 9,000 to 315,000 - the
lowest since November 2013. Markets remained concern on next week’s Federal
Open Market Committee (FOMC) meeting as the focus on how Fed Chair Janet
Yellen will review its existing benchmark forward guidance of a 6.5%
unemployment rate for considering a rate hike without rattling up financial
markets. With unemployment rate closing in on the threshold at 6.5%, it is
interesting to see how Fed officials align their shift in guidance along
with markets expectations.
For the week, Euro took almost full adjustment to
the US dollar’s depreciation pressure. Euro hit a 2 ½-year high of 1.3914 as
it continued to ride on the last week’s momentum as the ECB kept its key
interest rate unchanged – interpreted as a bullish move by the markets. The
improving inflationary environment peripheral EU countries and improving
geo-political concerns in Ukraine helped to drive Euro bullishness
further.
Japanese Yen broke its key support of the
100-moving average of 102.3 on combination of weak US dollar and concerns
over the health of China’s economy outlook. China’s industrial production
came in below consensus for the combined January/February period at 8.6%.
Retail sales were also weaker than expected at 11.8%, stoking worries that
growth could slow further as Beijing pushes for economic reforms.
Despite the bearishness of US dollar, Asian
currencies with an exception of Singapore dollar and Thai Baht, ended the
week with depreciation bias. The Korean Won, declined the most, with a
0.59% drop against the US dollar as Bank of Korea (BOK) left its benchmark
interest rate unchanged at 2.5% for the 10th straight month and the country
suffered inflated foreign selling on KOSPI followed by the Indian Rupee
which fell 0.57% on bets the central bank will start to buy dollars to
build up its foreign exchange reserves. Indonesia Rupiah declined 0.39% as
Bank Indonesia (BI) trimmed its 2014 economic growth to between 5.5 – 5.9%
on the back of slowing domestic demand and sluggish exports. BI’s decision
to keep its policy rate steady at 7.5% for a fourth straight month played
little role in affecting the currency.
Ringgit Malaysia ended the week mostly unchanged
with depreciation bias against the US dollar as the KLCI remained under
strong selling pressure following from less-than-inspiring recently
concluded corporate earnings result season. The 1-month NDF eased from
Monday’s 3.2907 to 3.2897 on Friday but the appreciation pressure on
Ringgit was partially neutralised by higher USD/CNY fixing that rose from
6.1312 to 6.135 for the review period. On the macro front, the industrial
production (IPI) rose 3.6% year-on-year in January compared to 1.7% in the
preceding month on the back of strong production of electrical and
electronics, petroleum and chemical products. Manufacturing sales value
rose 12.3% to record RM56.1 billion as compared to RM50 billion a year ago
mainly due to higher sales in the electrical and electronics sector.
Market Movers
for the Week
v From
US: TIC Flows (Jan), Empire manufacturing survey (Mar), NAHB housing market
(Mar), Industrial production (Feb), CPI (Feb), Housing starts (Feb),
Building permits (Feb), Current account (Q4), FOMC policy meeting, Existing
home sales (Feb), Philly Fed survey, Fed’s Bullard, Fisher, Kocherlakota
& Stein speak.
v From
Eurozone: CPI (Feb), ECB’s Weidmann speaks, ZEW survey (Mar), Trade (Jan),
Current account (Jan), Consumer confidence (Mar A), Germany ZEW survey
(Mar), PPI (Feb), UK Jobless claims (Feb), Average weekly earnings (Jan),
Unemployment (Jan), BOE minutes, Chancellor of Exchequer Announces
Budget.
v From
Asia: Singapore NODX (Feb), Hong Kong Unemployment rate (Feb), CPI (Feb),
Current account (Q4), China Property prices (Feb), Japan Trade (Feb), South
Korea PPI (Feb), Malaysia CPI (Feb).
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