RHB FIC Rates & FX Market Update - 9/6/15

9 June 2015

Rates & FX Market Update

USTs Reversed Losses; DM Currencies Gained Footing Against The USD

Highlights

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¨    UST yields fell with the market taking a breather after an upside surprise in US NFP data added to the lack of a strong domestic catalyst on Monday’s trading session. The higher yields could also renew appetite for USTs in the coming 3y auction today. Meanwhile, broad dollar strength eased against major crosses, where GBP and EUR rebounded 0.50% and 1.59% to 1.534 and 1.128 respectively. Separately, long-end EGBs led a broad bond sell-off as heightened risk appetite arose from signs of pickup in the Eurozone economy given the upbeat April German manufacturing data. While the Greece impasse could potentially prompt a degree of uncertainty, investors appear to remain relatively unfazed by the 30-June deadline amid general perception of low contagion risks and political implications in a default scenario.

¨    In AxJ, MYR broke above 3.77/USD (+1.43%), trading at a 9-year low. Excessively oversold levels suggest a potential reversal in the immediate term, as we pointed out that the USDMYR remains vulnerable to sentiment-driven volatility; this was in line with BNM Governor Zeti’s emphasis on Malaysia’s sound fundamentals to reverse the temporary weakness in MYR once uncertainty surrounding sentiment eventually subsides. Over in China, CNY and CGBs were little changed as investors remain nonchalant over the softening contraction in exports in May; we maintain a mildly bearish bias towards CNY given expectations for another 50-75bps cut by PBoC to counter the slower economic growth momentum.

¨    AUDUSD touched an intraday high of 0.7716 as commodity prices continued to stabilize amid a quiet calendar, with investors staying cautious ahead of the Australia jobs data for May. We hold a mildly bearish stance on the AUD, considering the dovish stance by the RBA and subdued inflationary expectations. (FY15 target: 0.73)

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