Daily FX Update, 9 September 2014

v  San Francisco Fed released a research paper suggesting the markets were underestimating the path for rates v  German exports rose above 100 billion euros for the first time in July v  China’s exports rose more than forecast in August, while imports unexpectedly fell, pushing the trade surplus to a record high for the second consecutive month v  Japan’s economy shrank an annualised 7.1% in the second quarter of 2014 v  Singapore foreign reserves declined 0.15% to SGD341 billion in August v  International reserves of Bank Negara Malaysia amounted to RM424.2 billion as at 29 August 2014

OVERNIGHT MARKET UPDATE: ·         Research released overnight by the San Francisco Fed suggests that the low volatility across financial markets may signal investors are underestimating how quickly the Federal Reserve will raise interest rates, with the public seeming to expect a more accommodative policy stance than FOMC participants. ·         German exports rose above 100 billion euros for the first time in July and the trade surplus climbed to an all time high, even as escalating sanctions against Russia threatened trade flows. July exports gained the most in two years, climbing 4.7% m/m to 101 billion euros. Imports slid 1.8% m/m in July. The current surplus widened to 21.7 billion euros from 17.2 billion euros. ·         In the currency market, the USD was broadly bid after the San Francisco Fed released a research paper suggesting the markets were underestimating the path for rates and that they were overly certain about that under-estimation. EUR, GBP, JPY and NZD all made new cycle lows against the USD. AUD/USD was under pressure as weakness in iron ore was factored into the price, with only JPY and GBP declining more. The Pound fell to a 10-month low last night after investors digested a weekend poll on the upcoming Scottish Independence Referendum which put pro-independence supporters marginally ahead. ·         US Treasuries rallied before a solid sell off late in the session. The 2-year bond yield finished 2 bps higher at 0.53% and the 10-year bond yield rose 1 bp to 2.47%. ·         US equities were mixed with the S&P 500 and Dow Jones declining, dragged down in part by a solid fall in the energy sector, while the Nasdaq edged higher, aided by a rally in Yahoo shares. The S&P 500 declined 0.3% to 2,002 and the Dow Jones fell 0.2% to 17,111 while the Nasdaq rose 0.2% to 4,592. ·         Oil prices declined overnight. WTI futures finished a modest 0.3% lower USD93.2 per barrel and Brent futures eased 0.6% to USD100.3 per barrel. ·         The spot gold finished 1.0% lower at USD1,255 per ounce overnight on the back of a stronger USD and as investors pared positions. INDICATIVE MAJOR CURRENCIES Last Close  8.15 am Snapshot        Bid                   Offer Expected Ranges for Today         Low                       High USD/MYR 3.1740 3.1800 3.1980 3.1700 3.2150 JPY/MYR (100) 2.9921 2.9970 3.0200 2.9800 3.0500 SGD/MYR 2.5216 2.5230 2.5490 2.5100 2.5700 EUR/MYR 4.0919 4.0950 4.1290 4.0700 4.1600 AUD/MYR 2.9458 2.9470 2.9780 2.9300 3.0000 GBP/MYR 5.1092 5.1160 5.1590 5.0900 5.2000 USD/JPY 106.08 105.90 106.10 105.50 106.50 EUR/USD 1.2892 1.2880 1.2910 1.2840 1.2950 AUD/USD 0.9281 0.9270 0.9310 0.9240 0.9340 Best regards, FX Research & Strategy AmBank Group Markets +603 2059 8606 (DL) +03 2031 4821 (Fax) Level 23, Bangunan AmBank Group, 55 Jalan Raja Chulan, 50200 Kuala Lumpur