FX
Global
Dollar firmed on Fed Yellen’s speech which was less dovish than
expected and the index gapped up this morning, further underpinned by the
soggy EUR. Policy divergence between the Fed and ECB is now stark enough to
keep the greenback on the uptrend though we do not rule out a tentative
correction now that this contrast has been priced in and more carry plays
allowed. The week ahead is less eventful and USD/AXJs are likely to shift into
consolidative mode. More data ahead out of the US including Jul new home
sales (Cons.:425k) on Mon, Jul durable goods order (Cons.:7.5%) and consumer
confidence index (Cons.:89.0) for Aug on Tue. The second estimate of 2Q GDP
is due on Thu and could see a slight downward revision to 3.9%q/q from the
previous 4.0% according to consensus.
The EUR moves are pretty much dictated by the USD. Jobless numbers for
Jul are due on Thu followed by CPI estimate out of the bloc. Expect minimal
reaction to these numbers and eyes are on the data out of the US. UK is on
holiday today. |
Australia’s 2Q CAPEX is due on Thu and should be watched for AUD cues.
Key release out of Asia will be India’s and Philippines’ 2Q GDP due on Thu and
Fri respectively. Onshore markets in Philippines are off today. Consensus for
its growth is a firmer 6.1%y/y compared to the previous 5.7%. A stronger number
may boost chances of another rate hike and tilt USD/PHP lower in range. INR had
been the outperformer in the past week. A stronger 2Q GDP print could continue
to underpin the currency. Elsewhere, Singapore’s CPI (Cons.:1.9%y/y) is due on
Mon followed by industrial production (Cons.:3.6%y/y) out on Tue. With the SGD
NEER near the implied mid-point of our model, we continue to expect USD/SGD to
remain in a tight range for 1.2400-1.2550 into next week. Thailand should
release all its trade numbers on Wed-Fri.
G7 Currencies
DXY – Shallow Dips. The DXY index received the bullish cue that it required and was last
seen around 82.60 this morning. Fed Yellen’s delivery on Fri was less dovish
than expected, citing “encouraging labour market improvements, not yet fully
recovered”. On the weekly chart, bulls look to have overextended itself this
week and a less eventful week post-Jackson hole could allow some retracement
and consolidation. With the prices now above the weekly ichimoku cloud and the
18-WMA crossed above the 40-WMA, expect retreats to be shallow with first
support seen around 82-figure ahead of the next at 81.71. Data aplenty
including new home sales on Mon, durable goods orders on Tue, consumer
confidence on Wed and the second estimate of GDP for 2Q on Thu.
USD/JPY – Buoyant. USD/JPY jumped pass our barrier at the key 104-handle
this morning underpinned by dollar strength. Daily MACD is showing increasing
bullishness, though RSI is indicating overbought conditions. After the upswing
over the past week, we expect the pair to consolidate ahead though risk-on
could keep retreats supported. A firm break of the 104-handle today could see a
bullish extension with the next barrier likely around 104.61. Support for the
week remains around 103.43 before the 103-figure.
AUD/USD – Choppy. AUD/USD had a choppy week
as dynamics of the US FOMC Minutes and China’s HSBC flash PMI-mfg prints tug
the pair in opposing directions. RBA Governor Glenn Stevens spoke but much of
it was a reiteration of past comments. Last seen around the 0.93-figure, the
outlook for AUD is bearish but carry trades still underpin and keep the AUD
above the 0.92-figure. Still, as policy adjustments of the Fed and BOE
approach, the AUD will be kept well under the 0.94-figure. Expect choppy trades
within 0.9240-0.9330 this week with key data 2Q CAPEX due on Thu.
EUR/USD – Tentative rebounds instore. EUR slipped below the
1.3320-support after the slightly more hawkish-than-expected FOMC Minutes and
waffled around 1.3280, not helped the least by ECB Draghi’s comments that all
available instruments will be utilized to ensure price stability over the
medium term. Even before his words, the pair has slipped below the weekly
ichimoku cloud and expect more bearish extensions ahead. Last seen around the
1.32-figure, conditions are a tad overstretched and may see a rebound in the
near-erm. We look for topsides to be capped by the 1.3367-resistance while dips
are likely to be supported by 1.3161. Key data in the week ahead includes
German IFO survey today and CPI estimates out of the Eurozone at the end of the
week.
EUR/SGD – Downward Tilt. The cross gapped down in tandem with the EUR/USD at
open but the former cross is already back on the uptick, likely taking a
breather from its recent slide. Outlook is still bearish for the cross with
interim support seen at 1.6462 ahead of the next at 1.6380. Dips are likely to
be shallow this morning given overstretched conditions. Expect moves to be
weighed by bearish outlook of the upcoming survey numbers and the flash HICP
number on Fri. Any interim retracements to meet barrier at 1.6603.
Regional
FX
The SGD NEER trades 0.17% above the implied mid-point of 1.2534. We
estimate the top end at 1.2284 and the floor at 1.2784.
USD/SGD – Sideways. USD/SGD move lower on Fri towards 1.2470 did not last. Pair bounced
higher this morning passed the 1.25-figure to 1.2514 underpinned by dollar
uptick. Directional remains lacking though as shown by momentum indicators. We
have CPI and IP data this week but these are unlikely to move the pair
significantly barring surprises. More likely to swing the pair are US data out
this week, including 2Q GDP. Any upside surprises could push the pair further
higher towards the 1.2544-barrier, marked by the 38.2% Fibo retracement of the
Jan-Jul downswing. Support remains around 1.2472 this week. Today CPI for Jul
will be released and market is expecting inflation to remain unchanged at 1.8%
y/y.
AUD/SGD – Upside Risks. AUD/SGD is edging higher on the relative weakness in the SGD to trade
around 1.1650 currently. Should the break above our barrier at 1.1640 be
sustained, further bullish steam is likely and upside extension towards 1.1686
is possible. Australia’s 2Q CAPEX out on Thu will be eyed for directional cues
this week. This could be a key swing factor for the cross this week. Support
for the week is seen around 1.1558 (12 Aug low). SGD/MYR – Heavy.
SGD/MYR continues to swivel in a tight range within 2.5280-2.5400. Risks are
still to the downside as MCD still shows bearish conditions and the 18-DMA
still lies below the 40-DMA. However, RSI is still indicating oversold
conditions. Next support is seen around 2.5176.
USD/MYR – Downward Tilt. USD/MYR reversed out the fall on Fri and
hovered around 3.1710 this morning. Nonetheless, we see pressure still to the
downside despite the dollar upmove. A looming rate hike in Sep keeps USD/MYR on
the backfoot and could revisit recent low of 3.1472. Expect sideway
trades to continue this week with a downward tilt. The bounce in spot prices
was mirrored by the 1-month NDF, last seen around 3.1770. Bearish momentum
waned on the cross but upmove does not convince and prices are still within
range, albeit choppy. Little directional bias at this point. Foreign reserves
fell a tad to USD131.6bn as of 15 Aug from previous USD131.8bn (31 Jul).
USD/CNY was fixed higher at 6.1653 (+0.0036), vs. previous
6.1617 (+2.0% upper band limit: 6.2911; -2.0% lower band limit: 6.0444).
CNY/MYR was fixed at 0.5145 (+0.0003). USD/CNY – Upside Tilt.
Pair steadied around 6.1540, supported by the higher fixing. Momentum is
slightly bullish for the pair and next barrier is now seen at 6.1700 this week.
Risks are to the upside but momentum is weak still and we could probably see an
upside tilt in price moves this week. Retreats should meet first support at
recent low of 6.1500 ahead of the next around 6.1400. Premier Li Keqiang urged
railway construction in central and western China cities to increase
urbanization (BBG).
1-Year CNY NDFs – Two-Way Risk. The NDF tested the barrier at 6.2429 last week but
prices are again on the upmove this morning, buoyed by dollar strength.
Momentum is lacking on either side at this point and we see two-way risks this
week. Amid a lack of indicators, expect consolidation with dollar strength to
add buoyancy. Next barrier is eyed at 6.2485. Support is seen around 6.2340. USD/CNH
– Rangy. USD/CNH was still sticky around the 6.1590-barrier this
morning. Momentum is a tad more bullish for this pair but we reckon the slight
downtick could mean that interests lie on both sides. Next barrier is still
seen around 6.1706. Support is now seen around 6.1522. CNH trades at a discount
to CNY now.
USD/IDR – Upside Risks. USD/IDR remains in a tight range within 11640-11750.
Bullish momentum is on the rise as indicated by MACD. Pair is currently sighted
higher back above the 11700-handle at around 11715, underpinned by dollar
strength. With the court battle now history, market will be focused on
president-elect Jokowi’s cabinet choices, his ability to build a parliamentary
majority and most importantly, his determination to deal with the problems
facing the economy, particularly fuel price subsidies. Meanwhile, continued
buying interest from foreign funds should continue to support the IDR as they
did last week, purchasing a net USD54.35mn in equities and adding a net
IDR3.63tn to their outstanding holding of government debt between 18-20 Aug.
With the lack of directional cues ahead, look for the pair to trade sideways
within 11600-11750 for the week still. The 1-month NDF is edging higher at
11773 to start the week with MACD showing dissipating bearish momentum. The
JISDOR ended the week fixed lower at 11654 compared to last Mon’s fixing of
11681.
USD/PHP – Rangy.
Onshore markets are closed today National Heroes Day and will re-open
tomorrow. USD/PHP is likely to trade range-bound when onshore markets
re-open tomorrow ahead of 2Q GDP out on Thu. Any moves are likely to take place
thereafter. We continue to expect the pair to remain in choppy trades
within 44.528-44.000 this week. The 1-month NDF is currently edging higher to
start the week, hovering around 43.910 currently with MACD forest still hugging
close to the zero line from above.
USD/THB – Edging Higher. USD/THB attempted again to firmly break above our
barrier at 32.050 this morning but remains within striking distance. Pair is
hovering around 31.992 at last sight with momentum indicators showing little
directional clues ahead. Moreover, an ichimoku cloud lies ahead that could
determine price action ahead. Foreign appetite for Thai assets were mixed last
week with a net THB1.05bn in equities bought but a net THb7.21bn in debt sold
off, which weighed on the THB. Risk-on moods this week could see a further
sell-off in Thai asset, helping to keep the pair elevated ahead. A firm break
of our barrier at 32.050 this week would expose the next at 32.245. 31.740
should remain supportive for the week. Trade data out this week will be eyed
for directional cues.
Rates
Local government bond market was lackluster with all eyes on the Jackson
Hole event, an economic symposium attended by prominent central bankers, policy
makers and academics around the world. Trades were sporadic with low volumes
reported. Some small buying was seen on the front ends as the 3y benchmark 3/17
inched 1bp lower. The rest of the curve still saw better sellers especially on
the 10y benchmark 7/24 as 3M KLIBOR added another 1bp to a high of 3.66%. Next
week market will see a retap on the 10y Islamic GII 5/24 which has an
outstanding size of MYR6.5b.
The IRS market was quiet with no trades reported. On the back of higher
3M KLIBOR, which has inched up another 1bp today to 3.66%, front end IRS was
better bid. At market close the IRS curve was pretty much unchanged.
In the PDS market, activity was slightly muted being coming to the end
of the week with relatively thin volumes. Market was treading cautiously going
into the Jackson Hole meeting tonight. Nonetheless, the underlying tone
remained better bid and the search for value offers focused mainly in the 10y
part of the AAA curve. The brave ventured down the curve for offers that
provides some liquidity premium on the illiquid names such as Noble and
Inverfin albeit primarily focusing on the shorter tenors to limit liquidity
risk. WI Rantau was quoted at last traded level and we think it is fairly
valued.
Singapore
SGS yields with 10 years or long in tenor traded 1-2bps lower, tracking
the marginally lower UST during Asian trading hours. All eyes set on Jackson
Hole tonight.
Asian credit closed firm with accounts chasing for yields continuing a
trend happening in the past few days. Indon sovereigns and quasi were bought up
touching YTD highs. The star of the day was the newly printed Yingde 2020 and
Chinese HY industrial which rallied almost 1.5points from
the break this morning, with CHMETL (a SBLC by ABC) followed suit tightening by
about 10bps. We saw a lot of buying of Singaporean banks lower tier-2
especially OCBC and UOB due to the coming redemptions of almost USD1b and
market expects subsequent reinvestments going into the next maturity. Malaysian
names were pretty active too on Petronas 19 and 22 both traded firmer. Market
will likely draw clues from the Jackson Hole meeting.
Indonesia
As expected, bond prices moved higher post constitutional court result
which met market expectation. There weren’t any market sentiment which could
drive bond price higher. Notting much occurred after the lunch break amid
higher bond prices. Bond prices today may decline if Fed yellen gave any
hawkish statement during the Jackson Hole economic policy symposium. Profit
taking opportunity may also been seen during the trading session today. 5-yr,
10-yr, 15-yr and 20-yr benchmark series yield stood at 8.012% (-1.5bps), 8.269%
(-4.3bps), 8.674% (-4.4bps) and 8.941% (-5.1bps) while 2-yr yield shifts up to
7.653% (+0.3bps). Trading volume was noted amounting Rp8,525 bn from Rp7,762 tn
with FR0068 (20-yr benchmark series) and FR0070 (10-yr benchmark series)
remaining as the most tradable bond. FR0068 total trading volume amounted
Rp3,533 bn with 118x transaction frequency and closed at 94.803 yielding 8.941%
while FR0070 total trading volume amounted Rp1,529 bn with 57x transaction
frequency and closed at 100.682 yielding 8.269%.
Indonesia Debt Management Directorate General (DMO) release bond
ownership data as of Aug 20th, 2014 which showed a significant purchase by
foreigners as they have added Rp5.05 tn between Aug 1 – 20. The significant
inflows haven’t caused any rally in bond price as what have occurred during the
month of Feb despite the inflow had taken through the secondary market. Foreign
ownership now stood at its new peak at Rp424.12 tn (36.70% of total outstanding
of government bond). Suprisingly, insurance companies bought Rp2.12 tn within
the same period of time while Banks just bought Rp430 bn.
Corporate bond traded heavy amounting Rp820 bn (vs average per day (Jan
– Jul) trading volume of Rp684 bn). TUFI01ACN2 (Shelf registration I Mandiri
Tunas Finance Phase II Year 2014; A serial bond; Rating: idAA)) was the top
actively traded corporate bond with total trading volume amounting Rp305 bn
yielding 10.445%.
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