FX
Global
NZD surged ahead of the rest after Fitch affirmed New Zealand’s “AA” and
upgraded its outlook to Positive. The currency spiked in Asian hours and
clocked a 0.3% gain against the greenback yesterday, hovering around 0.88 this
morning. On the other hand, the fall in UK’s output data dragged the GBP/USD
under the 1.71-figure at one point but the pairing has since made a full
recovery by Asia morning. Industrial production fell -0.7% m/m in May from a
growth of +0.3% previously. Manufacturing production contracted -1.3%m/m in the
same month from a previous growth of +0.3%. GBP/USD is now back to around
1.7140.
China starts its Jun data releases today with inflation numbers due
first. That is unlikely to move markets much. The US and China Strategic
and Economic Dialogue starts today in Beijing which will last until 11-July
(Fri). One of the hot topics that would be watched is the yuan and China’s
monetary policy. Eyes on the yuan fixing though we think the dialogue is unlikely
to sway China from its course. Minutes of the FOMC meeting in June will also be
released tonight as well and investors await the Fed’s view of the recent
uptick in CPI.
The main event in ASEAN is Indonesia’s Presidential Election today. A
quick vote count could be revealed as soon as late Asian hours today. USD/IDR
sank to 11626 by close on Tue. Onshore markets are closed for polling day but
we can expect a kneejerk reaction when markets resume tomorrow. For the rest of
Asia, broad dollar weakness to continue to allow AXJ to retain their gains.
Early starters have already taken the cue from US bourses. Nikkei was down
-0.3%. Cautious sentiments should keep the regional USD/AXJs within ranges.
G7 Currencies
DXY – Downside Bias. The dollar index remained heavy this morning and
was last seen around 80.15. Intra-day signals indicate downside bias with the
MACD pointing south and increasing bearish momentum. Next support to watch is
79.920 while the interim barrier is at 80.42. The Minutes of the FOMC meeting
in Jun is released tonight and while Fed Chair Yellen has dismissed the recent
uptick in the CPI, citing ‘noise’ in the data, a more hawkish tone in the other
members of the committee could be taken as a bull signal for rates.
USD/JPY – Downside Risks. USD/JPY is edging lower this morning, not
helped by rumors of missile being fired by North Korea and lower US and
European stocks. Pair is currently sighted around 101.53 though RSI is
signalling overstretched conditions. With risks to the downside this
morning, support is still seen at 101.20 with immediate hurdle at 101.76 ahead
of 102.20.
The speech by deputy BOJ governor Nakaso yesterday shed little new light on the
BOJ’s policy but he did highlight that the 2yr inflation target commitment did not mean the BoJ will end
its easing program in 2yrs.
AUD/USD – Capped. The soggy dollar continued to allow AUD/USD to rise
overnight and the AUD/USD pairing was last seen around the 0.94-figure. Bids
still hindered by the 0.9423-barrier though better data this morning still kept
the upside bias intact. Consumer confidence improved by 1.9% to 94.9 in Jul
from 93.2 previously. MACD indicated steady bullish momentum though for
pair that is likely to remain in range, we think upsides could be limited.
0.9420-barrier could be tested but bids beyond this level may not venture far.
Support is now seen around 0.3989 ahead of 0.3930. The labour report for Jun is
due tomorrow morning.
EUR/USD – Upward Tilt. EUR/USD edged a bit higher, last printed 1.3616 and
is still well within the range of 1.3575-1.3645. At this point, momentum
indicators show bullish conditions for the pair and there is scope for the pair
to firm towards the upper bound of this pair. Expect more rangy-trades with an
upward tilt.
Regional FX
The SGD NEER trades 0.41% 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 took out our support at 1.2451 on its way
down yesterday to hit a low of 1.2422 before bouncing slightly higher. Pair is
little changed this morning, hovering around 1.2431 with intraday momentum
indicators still showing little momentum in either direction. After yesterday’s
downtick, we look for the pair to consolidate at current levels for now. New
support is now around 1.2408 (1 Nov 2013 low) with 1.2451 guarding topside now.
AUD/SGD – Rangy. AUD/SGD is inching higher to around 1.1695 this morning
underpinned by AUD strength. Four-hourly MACD forest continues to hug the zero
line closely, suggesting little momentum in either direction still. We look for
the pair to trade in a tighter range of 1.1640/1.1730 today. SGD/MYR – Consolidating.
SGD/MYR is bouncing higher this morning after sliding for the past few
sessions, helped by a slight correction in the MYR. Last sighted around 2.5540,
intraday MACD forest continues to indicate little directional impetus ahead.
Ahead of tomorrow’s MPC, cross should be in consolidative mode within
2.5447/2.5630 today.
USD/MYR – Downside Bias. USD/MYR remained heavy as bids this morning was met
with offers. Pair was last seen around 3.1740 and could remain with downside
bias, as indicated by the MACD forest under the zero line. Expectations of rate
hike on Thu underpin the MYR. We think sideway trades should dominate ahead of
the BNM meeting tomorrow within 3.1660-3.1860. 1-month NDF bounced off from
late Asian lows and is back on the downtick this morning around 3.1790. There
is not much momentum in the pair now. Expect intra-day trades to be
consolidative.
USD/CNY
was fixed lower at 6.1565 (-0.0061), vs. previous 6.1626 (+2.0% upper band
limit: 6.2821; -2.0% lower band limit: 6.0358). CNY/MYR was fixed at 0.5139 (-0.0011).
USD/CNY –Rangy. Spot pulled back towards the 6.1953-support this morning before
steadying thereabouts, weighed by the lower fixing and perhaps anticipating
pressure from the US to appreciate the yuan in the upcoming US-China Strategic
and Economic dialogue which starts today. Still, there is little momentum in
the pairing and we expect consolidative trade within 6.1900-6.2050. China’s CPI
softened a tad to 2.3%y/y in Jun from the previous -2.5%. PPI contracted
slightly more than expected by -1.1%y/y, albeit still a smaller contraction
from the previous -1.4%. From the press, China may raise the RQFII quota even
higher (China Securities Journal).
1-Year CNY NDFs – Heavy. NDF slipped to a low of 6.2465 this morning, weighed
by the lower fixing before hovering around 6.2430 as we write. Intra-day MACD
shows decelerating bearish momentum. Expect downward drift to be more gradual
now with support some distance away at 6.2350. Barrier is seen at 6.2485.
USD/CNH – Bearish. USD/CNH slumped along with the rest of USD/yuans, testing the support
around 6.1967 before rebounding a tad to around 6.1974. Expect downside bias to
remain for this pair. CNH is now trading at a discount to CNY. There is not
much momentum on the intra-day chart and we expect dips to see buying interests
to keep pairing within 6.1950-6.2030.
USD/IDR – D-Day! Onshore markets are closed today as Indonesians go to the polls
to elect a president to replace President Susilo Bambang Yudhoyono whose term
of office ends on 20 Oct. Polls show a close fight between the Jokowi-Kalla and
Prabowo-Rajasa tickets, making the election too close to call. However, latest
LSI survey conducted beginning of Jul showed Jokowi-Kalla extending their lead
over Prabowo-Rajasa (47.80 vs. 44.20). That said, market appears to be
positioning for a Jokowi win. This was also reflected in the USD64.05mn in
equities purchased by foreign funds after they sold-off equities on Thu and
Fri. A Jokowi victory could see a kneejerk positive reaction with 11300 a
possibility, while a bounce back towards 12000 is likely for a Prabowo win. In
either case, the FX market is likely to remain volatile until there is policy
clarity and key economic members of the cabinet are announced. Though official
results will be known on 22 Jul, quick counts throughout the day should provide
an indication of how the vote went. Unofficial results will likely be available
by the end of day. Any election disputes will be heard by the top court on 2
Aug, which will still give ample time for the winner to assembly his cabinet. Onshore
markets re-open tomorrow. With onshore markets closed, focus will be on the
1-month NDF. The 1-month is currently on the dip, hovering around 11721 on
optimism of a good outcome for the election with risks remaining biased to the
downside. The JISDOR was again fixed lower at 11695 yesterday compared to Mon’s
11787.
USD/PHP – Supported on dips. USD/PHP attempted but failed to close below our
support at 43.421 yesterday. A re-test is currently taking place with the pair
currently sighted below that support level at 43.353. Should this move be
sustained, the next support is seen at 43.185. Intraday MACD forest though is
hugging close to the zero line, suggesting that further grind lower could be limited.
Topside remains guarded by 43.528 today. Yesterday, foreign funds bought a net
USD11.9mn in equities, which provided support for the PHP. After yesterday’s
massive dip, the 1-month NDF appears to be in consolidative trades, hovering
around 43.36 this morning with intraday MACD showing little momentum in either
direction.
USD/THB – Sideways. USD/THB is wobbling this morning, currently hovering higher around
32.385. THB continued to find support though from foreign funds purchase of
Thai assets with a net THB2.13bn and THB1.07bn in equities and debt bought
yesterday. Intraday MACD forest is hugging just a tad off the zero line,
suggesting little directional cues ahead. We continue to look for the pair to
trade in a tight range of 32.350/32.455 today. The NESDB is maintaining their
2014 growth forecast at 1.5-2.5% with export growth expected to come in at 3.7%
as the outlook has improved as reflected in the uptick in many economic
indicators.
Rates
§ The MGS market had another quiet day ahead of the MPC
meeting on Thursday, despite some early morning buying. Local and foreign banks
were seen buying in the belly part of the curve on thin liquidity. 3 and 5-year
benchmark remained unchanged, while 7 and 10-year benchmark traded down 1-2
bps. Prices were capped as sellers emerge to take profit as prices advance.
§ The IRS ended pretty much flat from yesterday, with
foreign parties looking to receive to take profit from paid positions. 2-year
traded at 3.765% and 4-year traded at 3.92%. 3M KLIBOR added 1bp to 3.57%,
which seemingly makes IRS look cheap to go paid but we think the market has
generally positioned paid ahead of the MPC, hence limiting further upside for
now.
§ The PDS market was overall firmer. AAA and GG names
continued to be sought after. Aman 2021 and Manjung 2021 traded at 4.53% and
4.51% respectively. Buying interest expanded down the credit curve to the long
AA3 as well. Names like Tanjung Bin Energy and Kesturi were bidded up but
offers were scarce.
Singapore
§ SGD rates were pushed lower and the curve bull
flattened in line with strong performance of US Treasury. At market close, the
IRS curve was lower by 1-4bps. Despite the lower IRS curve, there was however
little conviction to move SGS prices higher. Most players remained defensive at
the long end whilst the 15-year benchmark saw persistent offers. The
benchmark yield curve closed unchanged at the short end and lower by around
2bps further out the curve.
§ On the credit front, we saw two way prices quoted on
Chinese property names. Local players are looking for USD Malaysian name like
Petronas and Sime. In line with the presidential election in Indonesia
tomorrow, we saw broad based rally on Indonesian names. Perusahaan Gas Negara
and Pertamina were above par. Similar sentiment was shared on Thailand Banks
and Corporates, with strong buying interest in Krung Thai Bank, Siam
Commercial, and Kasikornbank.
Indonesia
Ahead of election, market opened with firmed bid. The 10Y bond dominated
the bond traded in market in the morning session to touch its lowest at 8.01%
today. Market still well bid after the Debt Management Office (DMO) announced
the auction, despite knowing the yield awarded was little bid generous compared
with market’s yield before the auction. At the end, market closed relatively
the same with yesterday closing. Let’s wait after the presidential election
done on 9 July 2014. Furthermore, yield closed at 7.74/8.02/8.50/8.73% for
5Y/10Y/15Y and 20Y respectively.
Indonesian government (DMO) held a series of conventional bond auctions
today and received a total of Rp22.29 tn bids versus its target issuance of
Rp10 tn or oversubscribed by 2.23x. However, only Rp15 tn bids were accepted
for its 3-mo, 1-yr, 5-yr, 15-yr, and 20-yr bond. The 3-mo SPN12141009 was sold
at a weighted average yield of 5.622%, 1yr-SPN12150710 at 6.7439%, 5-yr FR0069
at 7.80319%, 15-yr FR0071 at 8.55427% while 20-yr FR0068 was sold at 8.79961%.
Bid-to-cover ratio on today’s auction came in at 1.01X – 2.70X. No series were
rejected in the conventional bond auction today.
Tomorrow July 9, 2014 Indonesian financial markets, including the bond
market closed for the presidential election.
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