FX
Global
Oil prices remained elevated as US President Obama readies 300 military
advisors to Iraq. Overnight markets were rather languid as equity indices
drifted in and out of red, closing near the flat line. There was little
excitement in the FX space as well with GBP the clear winner of the session,
having sustained a move above the 1.70-figure and last seen around 1.7035 this
morning.
This could be another listless day for market players and the absence of
data cues could mean range-trading amid position adjustments ahead of the
weekend. The euro-area releases consumer confidence numbers but data is
unlikely to move the EUR. Early starters in Asia slipped into small red
in early trades, concerned about possible violent escalation in Iraq and oil
prices.
BOJ Kuroda speaks today but is expected to stick to his usual script. We
expect little inspiration for the JPY crosses from him. In Asia, the only
tier-one data of note is Malaysia’s CPI, due 1700 (HKT) today. A
firmer-than-consensus number could set a strong tone for MYR ahead of the next
BNM meeting on 10 July. The average forecast of May CPI is 3.3%y/y compared to
the previous 3.4%.
Overnight on World Cup front, Japan was unable to score against ten-men
Greece, ending the game with a goalless draw. Uruguay beat England 2-1 while
Columbia claimed victory against Ivory Coast 2-1 as well.
G7 Currencies
DXY – Two-Way Risks. The dollar index remained heavy post FOMC, waffling
around 80.31 as we write this morning. There was a brief test below the
80.275-support overnight before an equally sharp recovery. We can expect this
support level to remain at risk. Given the bearish momentum on the daily chart,
this index is likely to remain on a downward drift with next support seen at
80.11. In the absence of stronger cues, we expect prices to remain above this
level.
USD/JPY – Range-bound. USD/JPY remains whippy this morning after bids were
deterred by our support at 101.76 overnight. Pair is currently sighted still
below the 102.00-level at 101.91 with intraday momentum indicators tilted to
the downside. With the 18-DMA crossing above the 40-DMA, which suggested that
the pair could be supported at current levels ahead, pair is likely to remain
in range-bound trades within 101.76-102.20 today.
AUD/USD – Supported. AUD/USD softened towards the 0.94-figure along with a
deceleration in bullish momentum on the 4-hourly chart. 0.9383 remains
the next support level to watch ahead of 0.9319. The momentum indicators still
indicate upside bias in the pair and we expect further offers to meet some
support. Topsides to remain guarded by 0.9424/0.9450.
EUR/USD – Rangy. EUR/USD slipped from Asian highs in overnight trades to hover around
1.3610 at last sight. The pair is losing bullish momentum. There is little that
can move the pair out of the 1.3535-1.3650 range today. Interim barrier is seen
at 1.3617 while 1.3536 supports. EU Finmins meet in Luxembourg today along with
the release of consumer confidence for June.
Regional FX
The SGD NEER trades 0.74% above the implied mid-point of 1.2580 with the
top end estimated at 1.2330 and the floor at 1.2830.
USD/SGD – Bearish Momentum. USD/SGD broke below our nearby support at 1.2482
temporarily yesterday before rebounding to close around 1.2498. This morning,
the pair is on the slide again, hovering around 1.2490 as we write. With
intraday momentum indicators still tilted to the downside today, our support at
1.2482 could be re-tested. A break of that support would expose the next
stronger support at 1.2451. Resistance remains around 1.2540 today.
AUD/SGD – Supported. AUD/SGD is wobbly currently, sighted around 1.1748 this morning.
Risks remain tilted to the upside though they are dissipating and this should
keep the cross supported above 1.1730 today. Hurdle remains around
1.1780. SGD/MYR – Still Consolidating. SGD/MYR
continues to hover near the middle of the 2.5665-2.5940 trading range. Cross is
currently sighted higher around 2.5794 with little momentum in either
direction. Lacking directional cues, we look for the cross to continue
consolidating within within 2.5665/2.5940 today.
USD/MYR – Rangy. Pair edged further away from its Thu low to around 3.2215, underpinned
by slight risk-off sentiments. 4-hourly chart still shows slight bullish
momentum. Intra-day moves are likely to remained confined within 3.2115- 3.2275
with an upside tilt. 1-month NDF is edging higher as well, pressing on the
barrier at 3.2282. This pair is losing bearish momentum and could head higher,
signalling bullish risks for both the NDF and the spot. Eyes are now on CPI
which could swing the pair in this period of low volatility. A firmer print
than the expected 3.3%y/y could trigger more USD/MYR offers ahead of the next
BNM meeting on 10 July.
USD/CNY was fixed lower at 6.1524 (-0.0007), vs. previous 6.1531 (+2.0%
upper band limit: 6.2780; -2.0% lower band limit: 6.0318). CNY/MYR was fixed at
0.5203 (+0.0002). USD/CNY – Range-bound. USD/CNY hovered around 6.2280 this morning, still
retaining slight upside momentum despite the slightly lower fixing. Pair tested
touched support at 6.2230 before rebound back within the 6.2230-6.2410 range.
Price action suggests slight downside pressure nonetheless and the
6.2230-support is still at risk. A break here exposes the next support at
6.2096. In news, there whispers of “additional minor stimulus measures” that
could be introduced after Premier Li’s assurance of a minimum growth rate of
7.5%. In other news, iron ore trades are denied credit by banks amid a
clampdown on trade finance of commodities.
1-Year CNY NDFs – Range-bound. Pair steadied around 6.2340 this morning, despite the
slightly lower fixing. There is a lack of momentum for this pair despite the
slight bearish tilt in MACD on the 4-hourly chart. We continue to expect
intra-day moves to remain within 6.2255-6.2435.
USD/CNH – Flat. USD/CNH waffled around 6.2295, not led lower by the slightly lower
USD/CNY mid-point fixing. There is not much momentum on either side for this
pair as well and we expect more swivels around the 6.2280-mark with topsides
guarded by 6.2394 while offers to meet support at 6.2193.
USD/IDR – Consolidation. USD/IDR continues to trade in familiar ranges with the
cross currently sighted around 11976 this morning. Yesterday, foreign funds
sold a net USD17.23mn in equities, while latest data showed them piling up on
government debt, adding IDR7.51tn to their outstanding holding of bonds between
11 and 16 Jun. Risks remain tilted to the upside though it is waning. We
continue to expect to remain in consolidative trade within 11831-12055 today.
1-month NDF spiked above the key 12000-level this morning, hovering around
12015 currently, though risks remained tilted to the downside. After having
been fixed higher for four consecutive sessions, the JISDOR was fixed lower
yesterday at 11916.
USD/PHP – Capped. USD/PHP is edging higher this morning after yesterday’s bearish moves
that took out our support nearby at 43.855. Pair is currently sighted around
43.775 with intraday momentum indicators still tilted to the downside,
suggesting upsides could be capped. Next support is seen around 43.695 before
43.528, while 44.150 continues to guard topside today. The 1-month NDF is
wobbling this morning, little changed from yesterday’s close of 43.80 with
intraday momentum indicators are still tilted to the downside. The BSP
kept its key policy rate unchanged at 3.50% at its policy meeting yesterday as
expected, but it surprised the market with a 25bp hike to 2.25% in the Special
Deposit Account (SDA) rates across all tenors with immediate effect. The
changes to the SDA rates come in the wake of the 1% hike in the RRR at the last
meeting. These recent moves highlight the ongoing concern of the central bank
regarding strong liquidity growth. Our economic team believes the impact of the SDA rate hike will be
minimal given the modest size. While the amount in the facility will probably
not rise significantly as access has become more selective, it may slow the
exit of SDA funds.
Meanwhile, the central bank has revised upwards it forecast for inflation in
2014 and 2015 to 4.4% and 3.7% from 4.3% and 3.4% previously on the El Nino
effect.
USD/THB – Upticks. USD/THB is on the uptick this morning as Iraq concerns continue to
dominate, hovering around 32.479. Intraday momentum indicators continue to show
little directional cues, though the crossing of the 18-DMA above the 40-DMA
suggest the potential for upsides ahead. Still, there could be some support for
the THB should foreign investors continued load up on bonds (net THB8.41bn) as
they did yesterday to offset their selling of equities (net THB3.85bn). Price
action today should see 32.355 continuing to provide support while 32.550
should act as resistance. The proposed infrastructure development plan was sent
back for further revision yesterday with an eye to limiting expenditure to less
than THB2.4tn. The new revised plan will be re-submitted to ACM Prajin Juntong,
head of the junta’s economic team, within two weeks.
Rates
Yields on local government bonds ended the session a tad higher. Market
opened on a firmer note in reaction to better MYR and UST performance. Market
focus was on the MGS 3/17 WI which traded within 3.48%-3.455% range while
selected buying was seen on GII. However, market turned defensive after a poor
show at today’s auction which printed a bid/cover ratio of 1.389 as compared to
2.177 in previous auction in March 2014. The highest and lowest successful bid
was 3.53% and 3.459% respectively while the average yield was 3.486%. Post
auction, it was traded higher between 3.536%-3.521%. At market close, yield on
5 and 10-year benchmark MGS inched up 1bp to 3.74% and 4.05% respectively while
the 30-year benchmark MGS traded unchanged.
In the IRS market, rates ended generally lower across the curve. 2-year IRS traded at 3.74% and 3.755%. There was some
receiving flow in the 2-year IRS probably due to profit taking ahead of
Malaysia’s CPI print on Friday; however, it traded higher later the day at
3.755% after the poor 3-year MGS auction. 3M KLIBOR remained stable at 3.52%.
In the PDS market, high grades remained well bidded. Names like
Pengurusan Air, Danainfra, and Khazanah were sought after for tenors of 5-7
years. Volume picked up despite a slightly bearish tone in govvies.
Singapore
The SGS curve tracked the UST lower post the FOMC meeting on the Fed
Chair Yellen’s dovish message. Market opened on a slightly bullish note with
benchmark SGS yields generally down by about 2-5bps. Overall, bonds were well
supported with short covering seen in selective issues, and better bids were
seen in the long-dated issues including the 10, 15 and 20-year benchmarks. At
market close, SGS yields ended 1-3bps lower. IRS rates were marked higher by 2+
to 3+ bps from the 2y point onwards. 10y benchmark swap spread widened
almost 2 bps, and the 15y about 1bp. Meanwhile, MAS announced a slightly
larger-than-expected SGD2.2b 15-year new issue with auction date on 26 June.
In the credit space, Krung Thai Bank opened book for USD 10.5NC5.5 years
for a Basel III compliant tier-2 paper with price guidance at 5.50% area, which
is around CT5+383bps. We are still receptive of the Thai names at this juncture
although with the drawback of political issues, but market’s demand for yield
and relatively low supply risk should provide some cushion.
Meanwhile, China Construction Bank Asia came out with a CNH issue again,
with this time a 3-year paper with guidance at 3.50% (+/- 5bps) at Kuala Lumpur
market close. We think that Chinese HGs is currently less appealing in view of
expensive CNH funding accompanied by relatively high volatility; book was
around two times covered as we understood the issue will be around CNH1b in
size.
Indonesia
DMO received Rp1,484 bn incoming bid for the offered eleven source bond
series during the debt switch auction today and awarded only Rp1,252 bn. The
appetite for investor participating in the debt switch auction seem concealed
compared to previous debt switch auction where DMO received Rp4,886 bn incoming
bids and awarded Rp3,420 bn.
Bond market closed lower amid Fed dovish statement which supported
Rupiah’s appreciation to Rp11,935 per USD yesterday. There weren’t any market
sentiment which could move the price higher. Optimism of Indonesia government
for receiving Rp1,246.1 tn from tax revenue seems unreasonable. 5-yr, 10-yr,
15-yr and 20-yr benchmark series yield stood at 7.737% (+0.8bps), 8.106%
(+0.9bps), 8.493% (+0.8bps) and 8.685% (+1.9bps) while 2-yr yield shifted down
to 7.266% (-1.6bps). Trading volume at secondary market remains heavy amounting
Rp9,755 bn. FR0071 (15-yr benchmark series) and FR0070 (10-yr benchmark series)
was the most tradable bond during the day. FR0071 total trading volume
amounting Rp2,366 bn with 59x transaction frequency and closed at 104.194
yielding 8.493% while FR0070 total trading volume amounted Rp1,025 bn with 32x
transaction frequency and closed at 101.764 yielding 8.106%.
On the corporate bond segment, trading volume was seen thin amounting
Rp351 bn yesterday (vs average per day trading volume of Rp750 bn). SSIA01B
(Surya Semesta Internusa I Year 2012; B serial bond; Rating: idA) was the top
actively traded corporate bond with total trading volume amounting Rp120 bn and
was last traded at 99.04 yielding 9.6337%.
Rgds,
Maybank FX Research
Global Markets
Maybank
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