Despite, this dovish signalling
by the FOMC, we see further dollar moves higher as we approach June and also
in the early part of 2H 2015. Furthermore, we have revised our euro forecast
lower towards a low of 1.04 in 3Q on the back of the ECB QE and expected
interest rate differentials. As a result we are revising higher our dollar
index to 99.56 (previous: 96.51) in 2Q, 101.26 (previous: 98.11) in 3Q,
98.00 (previous: 96.00) in 4Q 2015.
We maintain the view of FFR hike
beginning Sep 2015 at the earliest totalling 50-75bps by end-2015 as we
believe Fed wants to be sure that growth is entrenched to further tighten
the job market that will in turn drive up inflation towards its longer term
objective of 2%, hence the cautious and gradual monetary policy normalization.
This suggests the US Fed Funds and LIBOR at end-2015 to be between 0.75% and
1.00% before rising to around 2.50% to 3.00% by end-2016.
We remain cautious on the
prospects of emerging market and regional currencies on the basis of the
dollar debt exposures in the region. Some of the regional markets in
particular Indonesia, Philippines, Vietnam, Malaysia and Korea are more
susceptible relative to others, on the basis of US$-denominated debt to FX
reserves. We would remain cautious on the IDR, PHP and MYR as we proceed
into June and 3Q 2015.
|
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.