Maybank GM Daily - 8 May 2014

FX

Global

·         US Fed Chair Yellen gave an upbeat assessment of the economic recovery though noted the risks that belie. Uncertainty stems from the continuing weakness in the labour market and geopolitical tensions. Her testimony before the Joint Economic Committee revealed that the Fed would stay the course with regards to QE tapering though monetary tightening would depend on the state of the economy. Low borrowing rates are needed to boost consumption, investment as well as the housing market. Sentiments improved but not likely only because of her words. Russian President Putin called on separatists to postpone independence referendum, easing tensions for now.

·         Dollar edged higher, led by the 10-year yields and a mild EUR retreat. Germany factory orders slid -2.8%m/m in Mar from the previous 0.9%, accompanied by a deterioration in France industrial production by -0.7%m/m.

·         On Wed, the Thai Court ruled against caretaker Prime Minister Yingluck Shinawatra and her cabinet during the 2011 period.  She was removed from office along with the Cabinet at that time. More THB weakness is expected given the political uncertainty.

·         China’s trade numbers are due in the morning which could give a clue to regional recovery momentum. Thereafter, BI, BSP and BNM will decide on monetary decision. No moves expected though we see statements to contain hawkish lilt. Post Asia, ECB and BOE will also make their policy decisions. Decisions could give stronger propensity to the EURGBP cross.

G7 Currencies

·         DXY – Tilting Higher. The index was on a gradual recovery from the Tue slump with the last few 4-hourly candlesticks consolidating near the minor 79.268-support-turned-barrier. MACD on the chart revealed a buy signal as the forest emerged above the zero-line. A break of the interim barrier at 79.268 could propel the greenback towards the 79.515. Still, focus today is not on the index as ECB and BOE take centrestage. Bullish to cap upmove in the index.

·         USD/JPY – Stuck in Range. USD/JPY edged higher on the improvement in risk sentiments and was last seen around 101.90. A rather firm support is seen at 101.33 and intra-day risks have flipped to the upside, according to the MACD. Next barrier is seen around 102.16 while 101.48 continues to slow offers.

·         AUD/USD – Bullish in Range. Pair pressed on the 0.9319-support ahead of the labour report as majority expects moderation from the Mar report. Employment change in Apr turned out firmer than expected at 14.2K along with an upward revision to the Mar number to 21.9K.  Unemployment rate steadied at 5.8%, accompanied by a lower participation rate at 64.7%.  MACD on the 4-hourly chart remained positive after the pairing bounce to around 0.9360. We see consolidation to extend within 0.9319-0.9383 with an upside bias.

·         EUR/USD – Supported. The EUR/USD pairing tends to take one big step forward and two mini steps back. Last seen around the 1.39-figure, the pair is poised to remain at the least supported above the 1.38-figure. 1.3863 marks the nearest support for the next pullback while 1.3967 is the next barrier to watch. MACD shows condition turning bearish on the 4-hourly chart so risks has tilted to the downside. Despite the volatility seen ahead with ECB, a pullback under the 1.3800 is unlikely today.

Regional FX

·         The SGD NEER trades 0.60% above the implied mid-point of 1.2578 with the top end estimated at 1.2328 and the floor at 1.2828.   USD/SGD – Wobbly.  The USD/SGD is creeping towards the 1.25-figure this morning on the back of a uptick in dollar. Last sighted around 1.2499, risks are to the upside with the pair inching closer to overbought territory. A sustained break of the 1.25-figure today could see bulls take control with the next hurdle seen at 1.2517 ahead of 1.2530. Downsides remains limited by 1.2451 (9-Apr low) today.

·         AUD/SGD – Upside.  Cross is inching higher at 1.1656 on the back of a softer dollar tone. Risks are to the upside but intraday MACD is showing waning bullish momentum, suggesting upside could be capped. 1.1685 guards topside today while 1.1590 is seen as support.   SGD/MYR – Bearish momentum.  Cross is breached our support at 2.5990 before rebounding to hover around back above the 2.6000-level at 2.6014. With risks to the downside, a re-test of 2.5990-support is likely with a sustained breach exposing the next hurdle at 2.5970. 2.6066 should cap upside today.

·         USD/MYR – Consolidation. USD/MYR has disregarded the 3.2495-barrier and edged higher to around 3.2530 on the back of modest dollar gains. Mar trade surplus was wider than expected due to the softer imports growth in the month. Nonetheless, the moderation in trade numbers lent support to the USD/MYR pairing. We continue to 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 a tad choppy within 3.2464-3.2629.

·         USD/CNY was fixed higher at 6.1557 (+0.0015), vs. previous 6.1542 (+2.0% upper band limit: 6.2813; -2.0% lower band limit: 6.0350). CNY/MYR was fixed at 0.5248 (+0.0001).

·         USD/CNY – Downside risks. Pair hovered around 6.2370 in initial trade this morning, lifted by the higher fixing. Support is seen at 6.2305. Intra-day indicators still flag bearish conditions. We see two-way risks within the 6.2180-6.2466. 1-Year CNY NDFs – Consolidation. The pair was resisted by the 6.2256-barrier though momentum is still increasingly bullish on the 4-hourly chart. Last seen around 6.2240, pair is likely to remain supported above 6.2154 and a move above the 6.2256-barrier exposes the next at 6.2358.

·         China’s CSRC began a surveillance of stock trading by insurance asset management companies for front running (Shanghai Securities News).

·         USD/CNH – Consolidation. USD/CNH trades in tandem with the NDFs, hovering around 6.2380. Intra-day chart shows some increase in bullish momentum and we see danger of another lift towards the 6.2450 today. Unexpected offers to be supported by the 6.2290-support.

·         USD/IDR – Overbought. The USD/IDR spiked above the 11600-level this morning to 11628 ahead of BI’s policy meeting later today. Intraday MACD forest is showing increasing bullish momentum with the pair now in overbought conditions. With parliamentary results just around the corner, the political scene remains fluid with recent polls showing Jokowi’s lead dipping. Still, that has not stopped foreign funds from buying a net USD29.53mn of equities and adding IDR1tn of bonds to their outstanding holdings yesterday, providing some support for the IDR. With several of our resistance levels taken out this morning, immediate barrier is now at 11658 (23 Apr high) ahead of the stronger 11700-barrier. Our previous 11555-barrier is now support nearby before 11500. In tandem with the spot, the 1-month NDF spiked past the 11600-level to 11668 this morning with risks to the upside. The JISDOR was fixed higher at 11527 yesterday from Tue’s 11511.  Indonesia’s monetary policy decision is on tap today and our economic team (and market) expects BI to keep policy rate steady at 7.50% as growth and inflation remain manageable. Also, they expect the deposit and the lending facility rates to be held steady at 5.75% and 7.50% respectively.

·         USD/PHP – Uptick. The USD/PHP closed below our 44.279-support level at 44.220 yesterday but is rebounding this morning on the back of a dollar uptick. Currently hovering around 44.280, risks are still to the downside. Moreover, foreign funds continued their buying spree, buying a net USD15.8mn in equities yesterday, supporting the PHP. Upsides today are likely to be capped by 44.421 with support is now seen at 44.150. 1-month NDF is inching higher this morning to 44.260 from yesterday’s 44.220 though risks remain to the downside.     Philippines’ central bank meets today to decide on monetary policy. Market expects the BSP to remain on hold today as the focus is on liquidity issues that could be dealt with better with macro-prudential measures like hiking the required reserve ratio than rising rates.

·         USD/THB – Upside risks.  Even after yesterday’s ouster of PM Yingluck, the USD/THB continues on its slow grind higher. The pair is currently sighted around 32.403 after hitting a high of 32.423 this morning. Foreign investors reacted negatively, selling a net THB2.12bn and net THB7.59bn in equities and government bonds yesterday and further is possible until there is clarity on the political front. Next up on the political calendar is the National Anti-Corruption Commission decision on whether to indict ex-PM Yingluck over the rice pledging scheme. With risks still to the upside, our barrier remains at 32.480 before the next at 32.550. 32.250 should be supportive today.    Thailand’s Constitutional Court removed caretaker PM Yingluck from her post yesterday for abuse of power over the transfer of Thawil Pliensri. Along with her, nine members of her 2011 cabinet were also removed. This however does not end her political problems. She still faces possible impeachment proceedings should the National Anti-Corruption Commission decide to indict her over the rice pledging scheme.

Rates

Malaysia

·         Yields on local government bonds ended the session lower. Market opened firmer in response to MYR which strengthened to 3.2420 at the opening from 3.2530-40 at previous close. Slip in US treasury yields further buoyed buying sentiment. Fresh flow from offshore party across the yield curve provided further support to the market. At market close, 3, 7, 10, 15 and 30-year benchmark MGS eased by 1-5bps to 3.38%, 3.86%, 3.99%, 4.36% and 4.81% respectively. Meanwhile, yields on 5 to 15-year GII slipped by 1-2bps on continued buying in an actively traded market.

·         MYR rates closed a tad lower for the 5 to 10-year region with only one trade being done onshore. Market remains lethargic prior to the MPC meeting.

·         In tandem with the rally on govvies, credit market has been scrambling to find long Government-Guaranteed papers. Danainfra 2033 and Danainfra 2028 traded at 5.16% and 4.91% respectively. Prasarana and Cagamas are also in the sought-after list, with various maturities changed hands below previous MTM.

Indonesia

·         Indonesia bond market closed lower on yesterday trading session with IDR currency traded higher. Selling interest was seen mostly on the 10yr and 15yr benchmark series. Central bank kept their reference rate unchanged at 7.50%. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield closed at 7.655% (+1.9bps), 8.047% (+8.6bps), 8.525% (+8.8bps) and 8.595% (+4.4bps) while 2-yr yield shifted up to 7.356% (+0.2bps). Trading volume at secondary market was seen heavy as total volume amounted Rp9,975 bn which was higher compared to previous volume of Rp4,750 bn. FR0069 (5-yr benchmark series) and FR0071 (15-yr benchmark series) was the most tradable bond during the day. FR0069 total trading volume amounting Rp1,413 bn with 44x transaction frequency and closed at 100.882 yielding 7.655% while FR0071 total trading volume was recorded amounted Rp1,328 bn with 88x transaction frequency and closed at 103.937 yielding 8.525%.

·         On the corporate bond segment, trading volume was noted heavy as well with trading volume amounting Rp889 bn. AKRA01A (AKR Corporindo I Year 2012; A serial bond; Maturity date: 21 Dec 2017; Rating: idAA-) was the top actively traded corporate bond yesterday with total trading volume amounting Rp121 bn and was last traded at 94.00 yielding 10.40982%..

Rgds,

Maybank FX Research

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