FX
Global
Risk aversion returned when Portugal’s Banco Espirito Santo (BES) suspended trading on Thu. Bank debt fears were
reignited in Europe when accounting irregularities were discovered at its
biggest shareholder. Espirito Santo International missed payments on
commercial paper to “a few clients” (BBG). US stocks were not spared as
bourses gapped down into red at open. There was gradual recovery thereafter
but indices still sustained modest losses by close. DJI at -0.4%; S&P at
-0.4% and NASDAQ at -0.5%.
Elsewhere, GBP swung to the lower end of its current range after the
BOE left interest rates unchanged via an unanimous vote. The GBP/USD pairing
touched a low of 1.7105 before a modest rebound to trade around 1.1720. |
Earlier in Asia, BNM hiked rates for the first time in three years. MYR
sold off this morning as market players took profit on what has been priced in
for the past two months. Overnight safe haven demand has driven dollar back to
around 80.20, softening to around 80.15 this morning. Expect Asian investors to
also act cautious
especially ahead of the weekend. That could keep USD/AXJs supported on dips.
Thailand is away for Asarnha Bucha Day.
G7 Currencies
DXY – Within Range. The dollar rose towards the 80.20-mark before
softening to around 80.15 in Asia. Interim barrier is around 80.1960 and needs
a sustained break here for upside extension. At the moment, the pair still
trades well within the 79.92-80.42 range that we have been eyeing and risks are
on both sides. The 4-hourly chart shows that MACD has lost all downside
momentum to around 80.20. Initial jobless claims slipped to 304K in the week
that ends on 28 Jun from the previous 315K.
USD/JPY – Downside Risks. USD/JPY was dragged lower overnight to a low of
101.07 by the sell-off in the other major equity markets before rebounding
slightly. Pair is currently sighted around 101.29 with risks still tilted to
the downside. A re-test of our support at 102.20 is likely today and a firm
break would extend bearish control with the next support at 100.77. Resistance
remains at 101.76 today.
AUD/USD – Choppy. AUD/USD recovered from its Asian decline and hovered around 0.9385 as we
write this morning. The employment report might have disappointed in details
but the conducive carry environment still underpins the currency. Momentum
indicators are not giving much of a cue as well and risks are on both sides of
the pair. Ahead of the weekend, the rest of the intra-day trades should be
dominated by sideway trades within 0.9360-0.9420. Home loans were flat in May,
an improvement from the decline of -0.2%m/m (revised) in month prior.
EUR/USD – Heavy. EUR/USD is back around the 1.36-figure again after
the overnight slide. Momentum indicators suggest downside bias towards the next
support but needs a break of this level for bears to extend their run.
Intra-day bids to be capped by 1.3621. Watch for any updates on Portugal’s BES
as a cue for market sentiments. EUR/SGD – Downside Risks. EUR/SGD swung
lower overnight on concerns over Portugal’s second largest bank Banco Espirito Santo which suspended trading. Support
is seen around 1.6864 (12 Jun) low. A break here could see more bearish
extension towards 1.6821 ahead of 1.3728. 1.16984 to deter bids.
Regional FX
The SGD NEER trades 0.48% above the implied mid-point of 1.2482 with the
top end estimated at 1.2234 and the floor at 1.2731.
USD/SGD – Consolidation. USD/SGD continues to trade in familiar ranges for
the past few sessions. Pair is currently edging higher this morning, sighted
around 1.2425 at last. Intraday MACD forest is currently hovering just a tad
above the zero line this morning, suggesting rangy trades are likely today. We
look for the pair to remain in consolidative trades within 1.2408-1.2445 today.
Singapore’s advance estimates for 2Q14 GDP will be released on Mon at 8am.
Market is expecting growth to slow in 2Q with real GDP to expanding by 3.1% y/y
compared to 1Q’s 4.9%.
AUD/SGD – Rangy. AUD/SGD wobbling this morning, hovering slightly lower at 1.1656
on the back of relative AUD weakness. Intraday momentum indicators continue to
show little directional cues this morning, suggesting rangy trades are possible
today. We continue to look for range-bound trades within the current
1.1640/1.1730 range today. SGD/MYR – Capped. SGD/MYR
gapped slightly higher at the opening to 2.5630 from yesterday’s close of
2.5601 on profit-taking after BNM hiked the OPR as expected. Cross is currently
sighted around 2.5634 with intraday MACD forest indicating little momentum in
either direction this morning though RSI is nearing overbought territory.
Immediate resistance remains at 2.5630 and a firm break should expose the next
hurdle at 2.5721. 2.5447 remains supportive today.
USD/MYR – Sold on Fact. USD/MYR gapped up to open at 3.1835 and rose to a high
of 3.1875 before levelling off as we write. Upside momentum is gaining on the
4-hourly chart according to the MACD. BNM raised overnight policy rate by 25bps
to 3.25% and market players took profits on what has been priced in for the
past few months and USD/MYR is all the more supported by overnight soured
sentiments. 1-month NDF on a gradual downtick and last seen around 3.1890. The
4-hourly chart shows bullish momentum in this pair and we expect prices to
remain buoyant within 3.1800-3.2000.Industrial production for May picked pace
to +6.1%y/y from the previous +4.9%. Three Malaysian banks including CIMB
Group Holdings, RHB Capital Bhd. And Malaysia Building Society Bhd. Have gotten
approval to create the country’s biggest banking group asset (BBG).
USD/CNY
was fixed higher at 6.1469 (+0.0026), vs. previous 6.1443 (+2.0% upper band
limit: 6.2723; -2.0% lower band limit: 6.0264). CNY/MYR was fixed at 0.5155
(+0.0024). USD/CNY –Rangy. Spot hovered around 3.2030 at open, off Thu’s lows of 6.1947 with
support at 6.1953 intact. Pair was guided higher by the firmer dollar tone.
There is still little momentum in the pairing according to the intra-day
charts. We expect to consolidative trade within 6.1900-6.2050. A break of the
upper bound to expose the next at 6.2094. US and China conclude their annual
talk today. China agreed to ensure flexible yuan for a greater alignment with
fundamentals. In other news, PBOC government commented that short and
medium-term policy tools will be prepared to guide interest rate (Rtrs). His
words underscored the central bank’s aim to liberalize interest rates. 1-Year
CNY NDFs – Sideways. NDF bounced higher, guided by the firmer fixing
and was last seen around 6.2585. MACD on the 4-hourly chart shows an upside
bias though the pair is still likely to remain within the 6.2430-6.2670 range.
USD/CNH – Bearish. USD/CNH steadied around 6.2060 this morning though bids are still
capped by the 6.2094-barrier. Bulls need to break this level. Otherwise, expect
more consolidation within 6.1960-6.2095. Momentum indicators show slight
bullish momentum. CNH has lost premium to the CNY and now trades at a narrow
discount to spot prices.
USD/IDR – Rebound. The USD/IDR gapped slightly higher at the opening to 11605 from
yesterday’s close of 11574 on rising political tension over the election
results with the prospects of violence between the supporters of both sides
igniting. Official results though will only be known by 21-22 Jul with an
appeal to the Constitutional Courts likely should the margin of victory be
slim. It also did not help that global risks appetite have deteriorated over
banking concerns in Portugal. The pair is still on the uptick, currently seen
hovering around 11630 with bearish momentum waning as indicated by intraday
MACD. However, foreign funds continue to provide support for the IDR,
purchasing a net USD361.06 in equities on expectations of a Jokowi victory –
the most since 14 Mar. For now, we expect the pair to trade in a tight range
within 11500-11750, barring any risk events. The 1-month continues to erase
most of the losses from Wed, edging higher at last sight to around 11673.
Intraday MACD forest has flipped with momentum now increasingly bullish. The
JISDOR was fixed lower at 11549 yesterday when onshore markets re-opened after
polling day, down from 11695 on Tue. As predicted by our economic team and
consensus, BI left its reference rate unchanged at 7.50% yesterday for the
straight eighth meeting. Also left unchanged was the FASBI and lending facility
rate at 5.75% and 7.50% respectively. This was to facilitate the narrowing of
the current account deficit to bring it within 2.5% of GDP in 2014 from 3.3% in
2013.
USD/PHP – Upticks. USD/PHP gapped higher at the opening to 43.400 from Thu’s close of
43.365 on prospects of a banking crisis in Portugal. Pair is currently edging
higher to 43.473 at last sight after sliding for the past few sessions, though
intraday MACD forest continues to hug close to the zero line from above.
Immediate hurdle to cross is still around 43.528. A firm break of this hurdle
would expose the next around 43.665. 43.185 continues to provide support today.
The 1-month NDF is on the uptick this morning, hovering around 43.450 with
intraday MACD indicating increasing bullish momentum.
USD/THB – Sideways. USD/THB ended yesterday with a doji, closing at 32.190, suggesting
little directional clarity ahead. This morning the pair is inching waffling,
hovering around 32.200 with intraday MACD forest hugging close to the zero line
with RSI indicating nearly overstretched conditions. THB continues to see
support from foreign funds, who bought a net THB3.69bn and THB15.66bn in
equities and debt yesterday. With little directional impetus for now, we look
for the pair to trade sideways in a tighter range between 32.137-32.310 today.
Rates
§ Local government bond market was quiet ahead of
today’s MPC. The MGS curve flattened with buying interest seen on the 15-year MGS,
which gapped 2bps lower from last done with a total of MYR390m worth of trades
done. Late afternoon saw buying interest with the 10-year MGS benchmark closing
1bps lower.
§ The IRS market was pretty quiet ahead MPC’s meeting,
although with some decent offering for payers looking to square position.
5-year traded at 4.03%, while 3M KLIBOR stayed flat at 3.57%.
§ The PDS market seemed to be active. Players were
hunting for bank papers and high grades, with Prasarana and Danainfra traded in
decent amount.
§ Meanwhile, at today’s MPC meeting, BNM raised the OPR
by 25bps from 3.00% to 3.25%, citing that further review of the degree of
monetary accommodation will depend on the MPC’s assessment of the balance of
risks surrounding the outlook for domestic growth and inflation. In view of
BNM’s lingering concern about the risk of financial
imbalances, we think it is more likely than not that OPR will be raised for
another 25bps by end-2014.
Singapore
§ Front end SGD rates traded lower on the back of dovish
FOMC minutes. The 2 and 10-year IRS were down about 3 bps and the 5-year
was down 5bps. SGS prices were also higher but trading activities were
subdued. Some profit taking was seen at the opening but market turned quiet
soon after and stayed rangebound for the rest of the day. SGS yields closed
unchanged at the front end and were down 1-2bps from the 5-year benchmark
onwards.
§ In the credit market, we saw better sellers for
Indonesian names as more presidential election news emerged after rallying in
the past couple of days. At current levels, we believe the rumours of Jokowi's
winning the election has been priced in, with more downside risk if Jokowi were
to lose the election. Skyland Mining, a subsidiary of China Gold International
is issuing 3-year USD with the guidance of T3+310bps, which seems fairly
attractive as China National Gold Group is the only 100% Central SASAC owned
gold company; we think the fair level for this issue is at around T3 + 270bps.
Order book had reached USD3b+.
Indonesia
IDR bonds rallied today after euphoria on Joko Widodo wins on unofficial
counts in the presidential election yesterday. But rallied happen only in short
lived as profit taking happens from local and end clients name. At closing,
bonds still gained 25/20/25/90bps on 5/10/15/20Y. 5Y traded at 7.66%, 10Y
traded from 7.92-7.99%, 15Y traded from 8.39-8.48% and 20Y traded from
8.59-8.63%. Furthermore, yield closed at 7.68/8.00/8.46/8.61% for 5Y/10Y/15Y
and 20Y respectively.
Indonesia Debt Management Directorate General (DMO) release bond
ownership data as of July 7th, 2014. Bank Indonesia as the largest buyer
amounting Rp12.56 tn compared to the end of June. Meanwhile, foreign looks to
sell about Rp 3.24 tn compared to the end of June. Foreign ownership stood at Rp400.35
tn (35.67% of total outstanding of government bond). 
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