Daily FX Update, 21 August 2014

OVERNIGHT MARKET UPDATE: ·         Minutes from the July 29-30 FOMC meeting showed the internal debate within the Committee is heating up. “Many participants noted that if convergence toward the Committee’s objectives occurred more quickly than expected, it might be appropriate to begin removing monetary policy accommodation sooner than they currently anticipated”. The range of views on the degree of slack in the labour market differed widely, but on balance the tone of the Minutes was more concessionary with many members noting that “characterization of the labour market underutilization might have to be changed before long, particularly if progress in the labour market continued to be faster than expected.” Markets are currently pricing the first hike in the Fed Funds rate for July 2015. ·         Minutes from the Bank of England’s August meeting revealed a 7-2 vote, with McCaffery and Weale voting to increase the base rate by 25 bps. They believe it would be prudent to raise rates before wage pressures arose, and that earlier rate rises would allow for a more gradual tightening cycle. ·         In currency markets, the USD was supported by less dovish tone from the FOMC minutes and GBP was supported after a 7-2 MPC vote was revealed with two MPC members voting for an immediate rate increase. ·         US Treasuries sold off early this morning following the release of the FOMC Minutes that were perceived as less dovish than expected. The 2-year bond yield rose 4 bps to 0.47% and the 10-year bond yield ended the session 2 bps higher at 2.43%. ·         US equities rose steadily overnight. The S&P 500 increased 0.2% to 1,987, the Dow Jones increased 0.4% to 16,979, while the Nasdaq was steady at 4,526. ·         Oil prices rose overnight as a government report showed US inventories were reduced by more than expected and refinery utilisation rates increased. Brent futures and WTI futures increased 0.7% and 0.8% to USD102.30 and USD96.07 per barrel. ·         The spot gold declined 0.3% to USD1,291.9 as the FOMC minutes raised the risk that Fed rate hikes could arrive earlier than expected.

INDICATIVE MAJOR CURRENCIES Last Close  8.05 am Snapshot        Bid                   Offer Expected Ranges for Today         Low                       High USD/MYR 3.1670 3.1670 3.1850 3.1570 3.2020 JPY/MYR (100) 3.0528 3.0510 3.0750 3.0300 3.1000 SGD/MYR 2.5312 2.5290 2.5550 2.5200 2.5700 EUR/MYR 4.1988 4.1960 4.2300 4.1700 4.2700 AUD/MYR 2.9412 2.9380 2.9690 2.9200 2.9900 GBP/MYR 5.2566 5.2540 5.2970 5.2200 5.3400 USD/JPY 103.74 103.60 103.80 103.20 104.20 EUR/USD 1.3258 1.3250 1.3280 1.3210 1.3320 AUD/USD 0.9287 0.9280 0.9320 0.9250 0.9350