FX
Global
Global growth woes continued to drag on US stocks as
benchmark indices lost more than 1% each on Mon. Bond markets were closed for
Columbus Day Holiday in the US. Onshore markets in Japan open today.
RBA’s Debelle warned about a sell-off in the
domestic bond markets this morning. On the currency, the Assistant Governor
said that it is above most “conventional estimates” of its fair value and
that a cheaper AUD could aid Australia to rebalance its economy. His comments
echoed what has been stated repeatedly in the monetary policy statement.
NAB business confidence deteriorated to 5 in Sep from 7 (revised) in
the month prior. Business condition index dropped to 1 from previous 3 and
AUD slipped.
Japan Sep domestic CGPI rose 3.5%y/y, slower than
the previous 3.9%. USD/JPY was above the 107-figure this morning, rebounding
from its overnight low of 106.76 – within striking distance of the
106.65-support that we have been eyeing.
Back home, MAS kept its modest, gradual appreciation
of the SGDNEER policy band, as expected. Singapore’s GDP swung to an
annualized growth of 1.2%q/q from the previous -0.1%. Year-on-year, GDP
steadied at 2.4%. China’s credit numbers and money supply for Sep may be
released anytime before Thu. Early starters have so far strengthened against
the greenback despite weak risk appetite. Expect gains to be capped. |
G7 Currencies
|
DXY – Turning Bearish. The DXY hovered drifted
towards the 85-figure, last printed 85.35 this morning. The greenback has
slipped under the ichimoku cloud on the 4-hourly chart. Momentum on the
intra-day chart is flat. There is no significant data release out of the US
today. Empire manufacturing, retail sales and the Beige Book will all be out
on Wed. Industrial production is due the next day. Fed Evans urged the Fed to
take its time to adjust monetary policy and sees the need of allowing a
“modest overshooting of our inflation target” (BBG). Support is seen at
84.5319. Break here exposes the next at 84.0729 (the 38.2% Fibonacci
Retracement).
USD/JPY – Downward Drift. The USD/JPY made a modest
rebound this morning, last seen above the 107-figure. That is still
insufficient for bulls to establish much of a foothold. The 18-SMA at 107.55
is still a formidable barrier to reckon for intra-day trades and a move above
this level exposes the next resistance at 108.17, marked by the 40-SMA on the
4-hourly chart. The intra-day tools show little directional bias though
recent moves indicate downtrend is still intact in the near-term. A failure
to break below the 106.50 could mean a potential rebound.
AUD/USD – Risks to the Downside. AUD/USD failed to sustain a
move below the 0.8643-mark and was back around the 0.8750 this morning. MACD
shows little directional bias on the intra-day chart while RSI also indicates
ample room on both sides. Despite the upmove on Mon, pressure is still to the
downside as the pair waffled around mid-0.87. Look for a retest of the
0.8643-support. 0.8820 is still the resistance for upticks. NAB business
confidence deteriorated to 5 in Sep from 7 (revised) in the month prior.
Business condition index dropped to 1 from previous 3. Soft data should keep
a lid on AUD gains.
EUR/USD – Upward Tilt. The EUR/USD bounced to a high
of 1.2761 in overnight trade before drifting off towards the 1.2720-levels by
Asia morning. Upmove was not internally triggered but rather a by-product of
broader dollar weakness. The 1.2820-barrier is still the next target for
bulls. 18-SMA is seen above the 40-SMA on the 4-hourly chart, signifying
scopef or upsides. Germany’s ZEW surveys are due later. Recent data out of
the European stronghold has been rather lackluster and EUR remains resilient.
Another disappointment on that front is unlikely to see the EUR break out of
the recent range. Beyond the near-term, upticks are still expected to be only
tentative. |
EUR/SGD – Upward Tilt. The EUR/SGD had choppy trades overnight with bids to
a high of 1.6232 rejected and the cross was last seen at levels around 1.6170.
Despite the pullback, there is scope for upsides and next barrier is seen around
1.6258. Intra-day chart also indicates slight bullish momentum. Pair is
thus likely to trade with an upward tilt within the recent consolidative range
of 1.6000-1.6300 as we have noted before. Next data to eye is Germany’s ZEW
survey.
Regional FX
The SGD NEER trades 0.38% above the implied mid-point of 1.2748. We
estimate the top end at 1.2494 and the floor at 1.3002.
USD/SGD – Two-Way Interests. USD/SGD drifted lower overnight and was lasts seen around the
1.27-figure after the monetary policy statement was released this
morning.1.2830 last Fri before pulling back towards levels around 1.2740 this
morning. MAS kept its modest, gradual appreciation of the SGDNEER policy band,
as expected. Singapore’s GDP swung to an annualized growth of 1.2%q/q from the
previous -0.1%. Year-on-year, GDP steadied at 2.4%. Notwithstanding the
policy statement, pair trades in tandem with most of USD/AXJ amid broad dollar
sogginess. Support is seen at 1.2652 this week (61.8% Fibo retracement of the
Jul-Sep rally). Topsides are guarded by the 1.2750-barrier.
AUD/SGD – Bearish. AUD/SGD
retraced lower following its upmove for much of Mon, last seen around 1.1140.
This cross is still weighed by the AUD weakness, not helped the least by the
softer NAB business surveys for Sep. Still, there are interests to buy on
dips in this pair and could keep this cross away from the recent low of 1.1026
which has turned into a support. SGD/MYR – Rangy. SGD/MYR touched
the upper bound of the ichimoku cloud on the 4-hourly chart around 2.5653
before retreating towards the 2.56-figure this morning. This cross is
still underpinned by MYR strength as onshore investors continue to digest the Budget
2015. Interests are still on both sides of the trade. Next barrier is seen
around 2.5710 while support is seen around 2.5567 ahead of the next at the
2.55-figure.
USD/MYR – Choppy. USD/MYR retreated in tandem with most of USD/AXJs, last seen just under
the 3.25-figure. Soft dollar tones continue to keep the pressure on USD/MYR
though the intra-day chart indicates flat momentum. Next support is seen at
3.2414, marked by the 200-DMA, ahead of the next at 3.2314 (38.2% fibo
retracement of the Aug-Sep rally). Topsides to be guarded by
3.2670.1-month NDF is on the downtick, but still within range of 3.2500-3.2880,
last seen around 3.26.
USD/CNY was fixed at 6.1408 (-0.0038), vs. previous 6.1446
(+2.0% upper band limit: 6.2661; -2.0% lower band limit: 6.0204). CNY/MYR was
fixed at 0.5292 (-0.0021). USD/CNY – Bearish. Pair broke
below the 6.1264-suport and last printed 6.1235 this morning, weighed by the
soft dollar tone and lower fixing. Next support is now seen at 6.1195. In news,
China may revise the insurance law and solicit feedback on draft rules as early
as year end (BBG).
1-Year CNY NDFs – Bearish. The NDF slipped from its open this morning, moving in
tandem with the rest of the USD/AXJs and was last seen around 6.2445. The
strong barrier at 6.2470 is still within striking distance. There is a lack of
momentum in this pair on the 4-hourly chart but the 18-SMA is trading higher
towards the 40-SMA. A break of the 6.2470-resistance opens the way towards
6.2575. Support is seen at 6.2350. USD/CNH – Downward Drift. USD/CNH is back on the slide this morning, last seen at 6.1353, weighed
by the downmove in the rest of its onshore peers. A strong support is still
seen at 6.1320 and a failure to break below this level could mean a bullish
reversal ahead. Momentum indicators are not showing much directional bias at
this point. Upticks are expected to be resisted by 6.1482. CNH trades at
a discount to CNY.
USD/IDR – Upticks. This pair hovered around 12190 this morning, as bulls were given a
breather by the soft dollar tone. Foreigners sold off USD48.8 mn equities and risk appetite remains weak this
morning. JKSE is down -0.6% at last sight. Downticks in the pair are thus
likely to remain supported by equity-related outflows. Prices are likely to
remain rangy within 12120-12280 for intra-day trades. The JISDOR was fixed only
a tad softer at 12202 on Mon compared to 12207 on Fri. The JISDOR fixing may
again be fixed slightly softer later. 1-month NDF slipped to trade around 12260
and bears may have stronger foothold today. Next support is seen at 12200. In
news, Finance Minister Chatib Basri warned that growth may slow from original
estimates of 5.1-5.2% for this year, owed to external headwinds.
USD/PHP – Rangy.
The USD/PHP steadied around 44.75 this morning, still well-within its
current tight trading range of 44.500-45.050. Intraday MACD continues to show
waning bearish momentum, suggesting that rebounds could remain capped. RSI
shows ample room for trades on both sides. Hence, expect consolidation to
extend within 44.500-45.050. Equity-related outflows are expected to cushion
downsides as foreign sold off USD24.7 mn worth of equities on Mon. Risk
appetite has recovered a tad this morning with PSEi at +0.2% at last sight. For
the 1-month NDF, prices steadied around 44.77, softening a tad on the soggy
dollar. The NDF is also expected to move sideways intra-day until fresh cues
emerge.
USD/THB – Sideways. The USD/THB remained pressured to the downside this morning and was
last seen below the 18-SMA at 32.42 as we write. Foreign funds sold off
USD57.8mn of equities and bought THB14.0mn worth of debt on Mon. Equity-wise,
SETi is still in red though support for the THB may continue to come from the
local bond markets, amid softer dollar cues and lower UST yields in the future
markets. A break of the support around 32.355 exposes the next at 32.18.
Upticks to be guarded by 32.48.
Rates
Malaysia
§ Post-national budget, the local government bond market
had a slow start in the morning, but trading activity picked up in the afternoon
with foreign names buying across the curve. Most trades were reported on 10y
MGS 7/24 and the bond closed 2bps lower from last done. The 10y GII 5/24
followed suit, but the spread remained unchanged at a huge 30bps spread. We
expect the flows to continue this week as players look to tomorrow’s auction of
MYR2.5b re-tap on 15y MGS 4/30.
§ IRS market saw players selling (receiving)
relentlessly yesterday. 5y IRS traded around 3.91%-3.90% and 10y traded at
4.17%. 3M KLIBOR remained at 3.75%.
§ PDS market saw buying interest pick up yesterday after
last Friday’s national budget announcement. Buying interest extended to AA
names such as UEM Sunrise and Tanjung Bin Energy. Most were done around the MTM
area. At this juncture, we believe real money is still cash rich and will look
for attractive pickups from upcoming primary issuances. With the slight rally
in govvies yesterday, GGs has gained momentum on names like Danainfra, Bank
Pembangunan, and Prasarana. We believe this will go on until the end of the week.
Singapore
§ SGS underperformed by about 2bps yesterday with the
SGD IRS maintaining its softness. We reckon PDs are continuing to feel the pain
from the tightening of bond swap spreads by about 1-2bps. We saw quite a lot of
buying interest in 20y and 30y SGS earlier in the day, but as Treasury futures
eased off, we slowly saw selling interest starting at the belly trickling down
towards the 10y region. The SGS curve in general closed the day slightly
flatter. We don’t expect big swings in Treasury futures tonight with the NY
market out of action.
§ The Asian credit market saw little activity and
liquidity due to the Japan and US holidays as well as a closed Treasury market.
With thin volumes, market became defensive and was moderately down across the
board. There was hardly any trade done in the investment grade segment, while
the high yield segment was dragged down by AGILE’s issue. AGILE’s management
had a conference call where they tried to assuage the market that they will be
able to meet their obligations and that the Chairman's house arrest will not
affect the business. The curve rebounded off its lows and managed to claw back
some points. Indonesian and Indian spaces were mostly untraded. New issue for
the day was only a 2y by AUS Group with final price guidance of 7.45% and a
book of about SGD170m. Target issue size was indicated to be around SGD100m.
Indonesia
§ With OJK capping banking sector deposit rate, ORI011
issuance sound to be a success. Recent road show at Palembang shows the
enthusiasm of Indonesia retail investor purchasing ORI011. As a result,
Indonesia government have increased their ORI011 issuance target to Rp18 tn –
Rp20 tn which in our view is achievable enough. ORI011 book building period
will be closed tomorrow Oct 15th.
§ Despite foreigner have sold Rp5.58 tn on MTD basis in
Indonesia bond market, bond prices have continued moving higher. Bond prices
have slight moved higher yesterday. We see that, investors might start
collecting Indonesia bond through secondary market since DMO bond supply scarce
in the final quarter of the year. DMO lower their indicative target in 4Q 14
conventional auctions to Rp8 tn. There were minimum sentiments moving the
market yesterday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at
8.151% (-4.0bps), 8.385% (-1.2bps), 8.765% (-1.2bps) and 8.881% (-4.0bps) while
2-yr yield shifts down to 7.670% (-1.1bps). Government bond traded thin at
secondary market amounting Rp5,793 bn with FR0070 (10-yr benchmark series) as
the most tradable bond. FR00070 total trading volume amounting Rp1,339 bn with
35x transaction frequency and closed at 992.922 yielding 8.385%.
§ DMO will conduct their weekly auction today with six
series to be auctioned which are SPN12150806 (Coupon: discounted; Maturity: 6
Aug 2015), SPN12151001 (Coupon: discounted; Maturity: 1 Oct 2015), FR0069
(Coupon: 7.875%; Maturity: 15 Apr 2019), FR0070 (Coupon: 8.375%; Maturity: 15
Mar 2024), FR0071 (Coupon: 9.000%; Maturity: 15 Mar 2029) and FR0067 (Coupon:
8.750%; Maturity: 15 Feb 2044). We do believe that the auction will be
oversubscribe by 2.0x – 2.5x from its indicative target issuance while our view
on the indicative yield are as follows SPN12150806 (range: 6.910% – 7.030%),
SPN12151001 (range: 6.980% – 7.100%), FR0069 (range: 8.050% – 8.200%), FR0070
(range: 8.290% – 8.400%), FR0071 (range: 8.680% – 8.800%) and FR0067 (range:
9.080% – 9.200%). On total, Indonesia government has raised approx. Rp386.38 tn
worth of debt through domestic and global issuance which represent 89.81% of
this year target of Rp430.2 tn.
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