Maybank GM Daily - 7 May 2014

FX

Global

·         Dollar lost grounds in late Asia and remained on the slide for the rest of New York session. The downswing was led by falling yields at the long end of the US Treasury curve, weighed also by the wider-than-expected trade deficit and earnings disappointment. 10-year yields ended around 2.59% on Tuesday. Equities were under pressure with DJI down -0.8%S&P at -0.9% and NASDAQ at -1.4%. Fear still emanate from the Ukraine-Russia saga.

·         As dollar fades into the background, the other majors gained. In particular, AUD was up 0.8%, trailing the SEK which gained near 0.9%. NZD was in third place, tempered by threat of interventions by the RBNZ. Governor Wheeler was concerned that the currency was too high given the “weakening fundamentals” and that RBNZ could sell it.

·         Earlier in Asia, RBA left rates unchanged on Tue. Statement was a tad more sanguine, especially on the labour market. AUD spiked and reversed out gains after the announcement but edged gradually higher on dollar weakness, also taking advantage of tentative NZD weakness as well.

·         In Asia, trading interest could increase as onshore markets in Japan return from Golden Week holiday. The FX space in the region could be quieter ahead of BI, BNM and BSP rate decision tomorrow. MYR is in the lead, up +0.2% against the greenback, as investors gear for a hawkish tone from BNM later tomorrow. Fed Chair Yellen is due to give her testimony to the Joint Economic Committee tonight.

G7 Currencies

·         DXY – Heavy. The greenback remained heavy after the broadbased selling on Tue, last seen around 79.12. Index was dragged at first by the surge in EUR, boosted by firmer EC PMI-services numbers. The greenback was hammered again by lower UST yields. Key support at 79.268 has been broken, exposing the next at 78.998. Intra-day indicators show an increase in bearish momentum. A minor resistance level is penciled in at 79.515.

·         USD/JPY – Stuck in Range. USD/JPY slipped further on broad dollar weakness and waffled around 101.60. Support is seen at 101.33 and risks are tilted to the downside. For a pair that has been within range, RSI is flagging near oversold conditions. We think pair could consolidate at the current levels today ahead of Fed Yellen’s testimonial. Momentum is slight bearish now and we cannot deny the downside risks. BOJ Minutes eyed today.

·         AUD/USD – Sideways. Pair rallied to mid-0.93 in NY session, lifted by broad dollar weakness and further supported when RBNZ threatened to sell the NZD. MACD on the 4-hourly chart shows bullish risks. 0.9319 has become a support level for the pair. We expect sideway action within 0.9319-0.9383 today. Retail sales softened to 0.1%m/m in Mar from 0.3% previously.

·         EUR/USD – Upside Risks. The EUR/USD pairing broke above the 1.3930-barrier and hovered thereabouts still this morning. 1.3967 is the next barrier to watch while an interim support has formed around 1.3920. 1.3860 marks the next support. MACD shows bullish momentum on the 4-hourly chart so risks remain to the upside. Break of the next barrier could bring the pair towards the 1.4-figure.

Regional FX

·         The SGD NEER trades 0.71% above the implied mid-point of 1.2560. We estimate the top end at 1.2311 and the floor at 1.2810.   USD/SGD – Wobbly.  The USD/SGD dipped to a low not seen since 11 Apr at 1.2465 yesterday but is bouncing slightly higher towards 1.2480 currently. Bearish momentum is waning, though the RSI remains close to oversold conditions at around 32, which suggest upside could be capped, possibly at the 1.2500-level. Downsides are likely limited by 1.2451 (9-Apr low) today.

·         AUD/SGD – Choppy.  Cross is choppy this morning after surging to a high of 1.1683 yesterday. Currently, the cross is hovering close to where it closed yesterday at 1.1663, pulled in both directions. Two way trades should see the cross to hover between 1.1590-1.1685 today. SGD/MYR – Bearish momentum.  Cross is on retreating this morning on the back of MYR strength, though the cross continues to hover above the 2.6000-figure at 2.26018. Bullish momentum has dissipated with intraday MACD forest now at the zero line. With our 2.6019-support breached, next support is seen at 2.5990 before 2.5970. 2.6066 continue to guard topsides.

·         USD/MYR – Bearish Tilt. USD/MYR gapped down (again and hovered around 3.2460. This pairing has is now on its way towards the next support level at 3.2360. Some confidence boosting from BNM Governor Zeti who expressed optimism on Malaysia’s readiness for capital inflow. We see two-way action for intra-day trade within 3.2360-3.2600 ahead of BNM’s rate decision later today. The 1-month NDF moves were in tandem, bias to the downside. Support still seen around 3.2464 while topsides could be guarded by 3.2629. Malaysia’s Mar trade data is due today and most expect moderation from the Feb numbers.

·         USD/CNY was fixed lower at 6.1542 (-0.0023), vs. previous 6.1565 (+2.0% upper band limit: 6.2798; -2.0% lower band limit: 6.0335). CNY/MYR was fixed at 0.5247 (-0.0005).

·         USD/CNY – Downside risks. Pair gapped down on lower fixing and hovered around 6.2220. Support is seen at 6.2177 ahead of 6.2085. 6.2305 has turned into a viable resistance level. Intra-day indicators flag bearish risks. 1-Year CNY NDFs – Consolidation. The pair took a peak below 6.21-figure and edged back to 6.2120. Next support is seen at 6.2154 but dips are likely to be shallow given the lack of momentum today. Barrier is now seen at 6.2256.

·         China’s PBOC pledged to keep the stability of its monetary policy. In a report released on Tue, the central bank will fine tune policies in light of changes so that the policy can stabilize growth, boost reforms, adjust structures, enhance people’s welfare and prevent risks (China Daily).

·         USD/CNH – Bearish Risks. USD/CNH trades in tandem with NDFs, hovering around 6.2230, a touch under the support that we eyed at 3.2240. Intra-day chart shows some paring in bearish momentum and while bias is still likely to the downside, we expect some consolidation today within 6.2186-6.2290.

·         USD/IDR – Rangy. The USD/IDR is wobbling this morning with the pair currently little changed from yesterday’s close of 11519. Intraday MACD forest is showing waning bearish momentum with the pair still hovering a tad off oversold conditions at 31. Still, political uncertainty ahead of the presidential elections in Jul and likely deterioration in the current account deficit are likely to limit downsides, while foreign funds buying of equities (net USD8.89mn yesterday) should provide some support for the IDR. For further downsides, we need to see a sustained break of the 11500-level to expose the support at 11475. Otherwise, continued tight range-bound trades within 11500/11555 can be expected today. The 1-month NDF climbed higher to 11560 this morning from yesterday’s close of 11545 with momentum now bullish. The JISDOR was set at 11511 yesterday unchanged from Mon’s fixing.

·         USD/PHP – Bearish. The USD/PHP continues to edge lower, hovering around 44.290 this morning. Momentum continues to be bearish with the pair still in oversold conditions. Strong fundamentals continue to attract foreign inflows with a net USD10.8mn in equities bought yesterday, supporting the PHP. With our support at 44.368 taken out, the new support is at 44.279 before the next at 44.150. Previous support at 44.368 is now seen as immediate barrier ahead of the next at 44.421. 1-month NDF is climbing higher this morning to 44.280 from yesterday’s close of 44.250 with risks still to the downside.     Philippines’ CPI rose 4.1% y/y in Apr (Mar: 3.9%), in line with market expectations, driven by higher food prices and energy and transport cost. Core inflation also rose by 2.9% y/y from 2.8% in Mar.

·         USD/THB – Upticks.  USD.THB is creeping higher this morning at 32.370 on an uptick in the dollar as well as concerns about the domestic political situation. Today could be D-Day for PM Yingluck as the Constitutional Court could rule for her and her cabinet’s removal from office today over the Thawil case. This was also reflected in the sell-off in government bonds by foreign funds with a net THB1.49bn sold yesterday, though they did purchase a net THB0.37bn in equities. Should the PM be removed, greater volatility is likely which could threaten our barrier at 32.480 and exposing the next hurdle at 32.550. The USD/THB is likely to trade within 32.310/32.450 in the interim.

Rates

Malaysia

·         Yields on local government bonds ended the session a tad higher. Market was rather cautious and on defensive side ahead of the MPC meeting with better sellers seen. Meanwhile, continued buying interest was seen on 7 and 15-year GIIs. At market close, 3 and 10-year benchmark MGSs rose 2bps to 3.38% and 4.03% respectively.

·         MYR IRS closed almost unchanged today with no trades reported.

·         Buying interest in the credit market continued even though the govvy market was slightly quiet today. Normal high grades are being sought after, like Danajamin, Khazanah and Prasarana. Decent amount of Imtiaz went through for maturity 2018 and 2016 at slightly lower than the existing MTM level. Further indication of direction will depend on the tone of the MPC statement this Thursday.

Indonesia

·         Indonesia bond market was relatively calm and quiet yesterday with barely any news or market sentiment moving the bond market. Slowing Indonesia GDP growth results which were much poor compare to economist consensus fails significantly impacting bond prices last two days. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield closed at 7.641% (+0.5bps), 7.965% (+0.5bps), 8.459% (+2.2bps) and 8.565% (+1.4bps) while 2-yr yield shifted down to 7.352% (-0.1bps). Trading volume at secondary market continue slowing as total volume amounted Rp4,749 bn which was lower compared to previous volume of Rp6,333 bn. FR0069 (5-yr benchmark series) and SPN12140703 (1.5-mo) was the most tradable bond during the day. FR0069 total trading volume amounting Rp769 bn with 16x transaction frequency and closed at 100.938 yielding 7.641% while SPN12140703 total trading volume was recorded amounted Rp505 bn with 7x transaction frequency and closed at 99.121 yielding 5.885%.

·         Indonesian government held a series of auctions yesterday and received a total of Rp2.83 tn bids versus its target issuance of Rp1.50 tn or oversubscribed by 1.89x. However, only Rp0.94 tn bids were accepted for its 5-mo SPN-S which was sold at a weighted average yield of 6.02511%, 13-yr PBS003 at 8.62266% while 30-yr PBS005 was sold at 8.98989%. Incoming bid at today’s auction was slightly lower compared to April 22^nd, 2014 sukuk auction amounting Rp2.97 tn and were mostly clustered at the 5-mo SPN-S. Bid-to-cover ratio on yesterday’s auction came in at 1.02X - 7.13X. PBS006 were rejected during the sukuk auction. Till the date of this report, Indonesian government has raised approx. Rp29.38 tn worth of debt through bond auction in 2Q 14 which represents 44.51% of the 2Q 2014 year target of Rp66 tn.

·         On the corporate bond segment, trading volume continue remains thin amounting Rp312 bn. AIRJ01C (TPJ I Year 2008; C serial bond; Maturity date: 24 Dec 2016; Rating: A(idn)) was the top actively traded corporate bond yesterday with total trading volume amounting Rp60 bn and was last traded at 104.145 yielding 8.1435%..

Rgds,

Maybank FX Research

Global Markets

Maybank

DID: +65 63201379

Fax: +65 65369816

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