FX
Global
The dollar index strengthened overnight as a segment of the
markets seemed to see some marginal signal from Yellen on a possibility of an
earlier hike despite a somewhat balanced prepared testimony. In Yellen’s
semi- annual testimony to the US Senate Committee yesterday, there were no
drastic changes in bias and in her prepared testimony, Yellen reiterated that
interest rates are likely to stay low for a “considerable period” after the
Fed ends its asset-purchase program, which she repeated from the June FOMC
minutes that it could happen following the October meeting. In response to
questions on when the Fed will start to hike rates, she replied “There are
mixed signals concerning the economy...We need to be careful to make sure
that the economy is on a solid trajectory before we consider raising interest
rates,” . But she also said that “If the labour market continues to improve
more quickly than anticipated by the [FOMC] committee, resulting in faster
convergence toward our dual objectives, then increases in the federal funds
rate target likely would occur sooner and be more rapid than currently
envisioned.” Which suggests a 2015 hike. We still have another testimony
tonight.
Equity indices slipped into red. DJI closed flat while S&P and
NASDAQ were down -0.2% and -0.5% respectively. Earlier in the session, dollar
already gained on the back of soggy EUR when the German ZEW survey missed
expectations at 61.8 in Jul vs. 67.7 previously. Survey expectations also slipped
to 27.1 from previous 29.8. Most majors weakened against the greenback but
GBP was the clear outlier which gained +0.4% against the USD for Tue after
its Jun CPI beat consensus. More GBP cues to come from ILO unemployment.
Early starters in Asia already see cautious trade with Nikkei and
Kospi flat. China’s 2Q GDP came in at 7.5%y/y, in line with the annual
target. Focus is quickly shift back to the West for second half of Fed
Yellen’s testimony tonight. Thereafter, the Beige Book is due for release. |
G7 Currencies
DXY – Capped. The greenback bounced against most majors, sending the
index to a high of 80.417, still hovering thereabouts this morning. The index
is testing the 80.420-barrier as we write and intra-day signals show increasing
bullish momentum. A clean break here exposes the next barrier at 80.6810 though
RSI flags overbought conditions. Thus, expect this index to remain capped for
now. 10-year yield is back to where it was before her testimony and investors
await the second half tonight along with the Beige Book. Risks at this point
are to the upside.
USD/JPY – Upticks. USD/JPY edged higher on the back of a less-than-dovish Yellen testimony
to Congress overnight. Pair is currently sighted around 101.72, just off our
resistance at 101.76 with intraday MACD still showing bullish momentum ahead. A
firm break of immediate hurdle at 101.76 would expose the next at 102.20.
101.30 should be supportive today. BOJ kept policy steady yesterday as
expected. There were no surprises in the policy statement or post-statement
press conference. However, the central bank did trim their 2014 growth target
to 1.0% from 1.1% to take into account the hit the economy took from the sales
tax. On the inflation front, the bank continues to expect its 2% target to be
reached next year.
AUD/USD – Tilting lower in Range. AUD/USD slipped on broad dollar gains and poorer risk
sentiments overnight. This pair was last seen around 0.9360 and gaining bearish
momentum. Bears need a decisive move below 0.9360 to reach the next technical
support at 0.9329. More cues ahead during New York session. Upticks now can be
resisted by initial barrier at the 0.94-figure, ahead of 0.9423.
EUR/USD – Bearish Risks. EUR/USD settled lower around 1.3570 in early Asia,
awaiting more cues from the US. German ZEW disappointed and dragged the pair
lower, giving the greenback a firm tone even before NY session. The EUR/USD
pair has gained much bearish momentum and next support is seen around 1.3536.
The 50-DMA still caps topside at around 1.3641. Intra-day chart shows slight
bullish momentum and we continue to eye the barrier at 1.3641 for unexpected
rebounds at this point. Risks are still tilted t the downside.
EUR/SGD – Pressured by the Cloud. EUR/SGD came within striking distance of recent low of
1.6864 before a modest recovery to levels around 1.6880 as we write this
morning. The 4-hourly chart shows a thick ichimoku cloud capping bids. MACD
indicates that the cross has lost all bullish momentum in the last session MACD
forest is now at the zero line. This cross is likely to remain under pressure
with bids to be resisted by the 1.6917-barrier, marked by the lower bound of
the bearish cloud. Support is seen at 1.6864 ahead of 1.6821.
Regional FX
The SGD NEER trades 0.73% above the implied mid-point of 1.2532 with the
top end estimated at 1.22838 and the floor at 1.2780.
USD/SGD – Capped. USD/SGD is on the uptick this morning following a less-than-dovish
Yellen yesterday. Pair is hovering around 1.2442 at last sight with intraday
MACD forest still hugging closely to the zero line from above. This suggests
that further upmoves could be capped today with immediate hurdle seen at
1.2450. Support remains around 1.2380. Offers likely around 1.2450 today. NODX
for Jun is on tap tomorrow and market is expecting a more moderate decline of
3.0% y/y vs. May’s -6.6% with electronics shipment likely to dip by a smaller
12.1% y/y in Jun compared to -15.3% in May.
AUD/SGD – Sideways. AUD/SGD is currently trading near the lower half of its
1.1620-1.1724 trading range, hovering around 1.1645 currently. With intraday
MACD forest now at the zero line, sideways trade remains likely ahead. 1.1620
should support with offers around 1.1724 today. SGD/MYR – Bouyant
in Range. SGD/MYR is inching higher this morning on the back of
relative MYR weakness. Cross is currently sighted around 2.5696 with intraday
MACD still providing little directional cues. We look for the cross to trade
range-bound in within 2.5564-2.5771 today.
USD/MYR – Upside risks. USD/MYR bounced to a high of 3.2020 before easing back
under the 3.20-figure. The pair is capped by the 3.2040-barrier and could
remain in buoyant trades within the 3.1800-3.2040 today. The 1-month NDF rose
in overnight session before easing to around 3.2030 this morning. Momentum is
still buoyant and we expect intra-day moves to remain buoyant within
3.1964-3.2130 today. Jun CPI is due today and consensus is a firmer 3.3%y/y
compared to the previous 3.2%. An upside surprise could shift bets towards a
rate hike in the near-term.
USD/CNY
was fixed higher at 6.1535 (+0.0045), vs. previous 6.1490 (+2.0% upper band
limit: 6.2791; -2.0% lower band limit: 6.0328). CNY/MYR was fixed at 0.5177
(+0.0028). USD/CNY –Choppy in Range. Spot broke above the 6.2104-barrier this morning, on
its way towards 6.2167. Momentum is still bullish and support is seen around
6.1950. China’s 2Q GDP is out at 1000 (HKT) and majority expects a steady
growth pace at 7.4%y/y. From the local press (Shanghai Securities News), a
researcher from Development Research Centre warned of risks of a liquidity trap
and that China should have relatively loose monetary policy.
1-Year CNY NDFs – Buoyant. NDF on the gradual upmove to test the 6.2672-barrier,
having broken the 6.2620-resistance. Pair was inspired by the higher fixing,
even as top officials said growth picked pace in 2Q from the previous quarter.
MACD on the intra-day chart shows slight upside bias and we eye a break above
the 6.2672-barrier to head towards next bullish target at 6.2725.
USD/CNH – Bid in Range. USD/CNH pulled back sharply this morning, bucking the
trend in USD/yuans and was last seen around 6.2120. Support is seen at 6.2094
and pair is losing bullish momentum on the MACD forest. CNH trades at a
discount to CNY at the moment.
USD/IDR – Upside Risks. USD/IDR gapped higher at the opening to 11810 from
yesterday’s close of 11736 as concerns over political uncertainty even if
Jokowi is declared the winner on 22 Jul following the “permanent parliamentary
coalition” formed by Prabowo. Other concerns like the twin deficits are also
beginning to resurface. While foreigners remains sanguine about Indonesia, they
are buying less domestic assets with just a net USD22.41mn of equities bought
yesterday vs. the post-election purchase a net USD615.6mn. Intraday MACD
continues to show bullish momentum, though RSI is now indicating overbought
conditions. We continue to expect further upticks ahead of the official results
with hurdle now seen at 11875 ahead of 12000, while 11500 remains supportive.
The 1-month NDF continues on its upmoves, hovering around 11871 this morning
with risks still to the downs though RSI is indicating overbought conditions.
The JISDOR was fixed higher at 11709 yesterday compared to Mon’s fixing of
11627.
USD/PHP – Downticks. USD/PHP is on the slide this morning, sighted around 43.610. Intraday
MACD though is still showing bullish momentum, suggesting downside could be
limited. Barrier today is seen around 43.855, while 43.185 continues to limit
downsides. The 1-month NDF remains on the uptick, hovering around 32.730 this
morning. Risks remain on the upside with RSI indicating overbought conditions.
May remittances rose by 5.4% y/y, lower than consensus expectations of 5.7%,
but were better than Apr’s 5.2%.
USD/THB – Upticks. After hitting a low not seen since Mar, USD/THB is bouncing slightly
higher this morning underpinned by a firmer dollar tone. Pair is sighted around
32.190 with bullish momentum on rise as indicated by intraday MACD. Yesterday,
foreign funds loaded up on Thai assets with a net THB1.59bn and THB10.82bn in
equities and debt purchased, which if it continues, should weigh on the pair.
Upticks today though are likely to be gradual. Support is still seen at 32.050,
while offers are likely to be capped around 32.310 today. The military junta
approved the budget for 2015 yesterday. The budget included investments in
dual-track train network, water management projects, transit system and
logistics valued at THB450.1bn. The deficit is expected to come in at THB250bn
in 2015.
Rates
Please note that there is no write-up on Malaysia and Singapore fixed
income today.
Indonesia
Indonesia bond
market closed lower with a relatively thin trading volume. KPU official result
on July 22nd remains as the top concern. Indonesia central bank sees that July
monthly inflation to pick up to around 0.8% - 1.2% due to Ramadan price
pressures and sees FY2014 inflation range of 3.5% - 5.5%. June trade balance is
also expected to be deficit at around US$300 mn. Note that cumulative trade
balance till May (publication in July) is still deficit of US$863 mn which is
still better compared to the cumulative trade balance of the same period last
year of US$2,057 mn. 2Q current account is expected deficit of 4.00%. Yield
curve bear steepening with 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield
stood at 7.857% (+1.9bps), 8.164% (+3.5bps), 8.641% (+3.3bps) and 8.815%
(+3.8bps) while 2-yr yield shifts down to 7.451% (-0.6bps). Trading volume was
noted amounting Rp5,568 bn yesterday which shows a rather thin trading volume.
FR0068 (20-yr benchmark series) and FR0067 (30-yr) was the most tradable bond
during the day. FR0068 total trading volume amounted Rp721 bn with 41x
transaction frequency and closed at 95.903 yielding 8.815% while FR0067 total
trading volume amounted Rp590 bn with 19x transaction frequency and closed at
97.505 yielding 8.991%.
Indonesian government held a series of auctions yesterday and received a
total of Rp1.60 tn bids versus its target issuance of Rp1.50 tn or
oversubscribed by 1.06x. However, only Rp0.25 tn bids were accepted for its
6-yr and 30-yr sukuk bond. Incoming bid during the auction came in lower by
18.75% compared to July 1st, 2014 sukuk auction amounting Rp1.96 tn and were
mostly clustered at the 5-mo SPN-S. The 6-yr PBS006 was sold at a weighted
average yield of 8.23231% while 30-yr PBS005 was sold at 9.28958%. Bid-to-cover
ratio during the auction came in at 1.26X – 1.38X. SPN-S02012015 bids were
rejected during the sukuk auction yesterday. The incoming bid result was below
our expectation of oversubscribed by 2x – 2.5x of indicative target. In total,
Indonesian government has raised approx. Rp280.96 tn worth of debt through bond
auction which represents 64.41% of the FY 2014 year target of Rp436.2 tn. In 3Q
2014, DMO plans to raise gross issuance of Rp96 tn through the weekly debt
auction. Till the date of this report, Indonesian government has raised approx.
Rp16.41 tn worth of debt through bond auction in 3Q 14 which represents 17.09%
of the 3Q 2014 year target of Rp96 tn. On total, Indonesian government has
raised approx. Rp281.14 tn worth of debt through domestic and global issuance
which represent 65.35% of this year target of Rp430.2 tn.
On the corporate bond segment, trading volume was seen rather thin with
total volume amounting Rp235 bn yesterday (vs average per day trading volume of
Rp750 bn). ADMF02BCN3 (Shelf registration II Adira Finance Phase III Year 2014;
B serial bond; Rating: idAA+) was the top actively traded corporate bond with total trading volume amounting Rp54 bn and
was last traded at 100.55 yielding 10.2704%.
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