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v U.S. economy’s solid showing along
with hawkish comments from a Fed official serve to strengthen the case for US
FOMC to boost interest rates in September 2015
v Focus remains on Greek development
v JPY is edging higher towards the
124-handle
v Asian currencies end the week on
bearish mode
v RM falls 0.94% against US dollar on
the back of higher cross SGD/MYR, easing of local equity and rising cross
default swap rate
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U.S.
economy’s solid showing so far along with hawkish comments from a Federal
Reserve official that pushed up US Treasury yields, served to strengthen the
case for US FOMC to boost interest rates in September 2015. US mortgage
applications were up in June after the last release showed a massive
slowdown. This is a good sign for economic expansion and indicates that
household incomes are higher and this could be a signal for stronger labour
metrics in the future. Existing home sales rose at the fastest rate in years
while a gauge of business spending rose for the second time in three
months. US dollar sentiment also brightened in remarks from Fed
Governor Jerome Powell who acknowledged that he was in the two rate hikes by
year-end camp.
Focus
remained on Greek development and to-date, Euro down against US dollar as
markets grew nervous over prospects of Greece clinching an imminent deal for
more rescue cash. Greece’s creditors reportedly shot down Athens’ latest
proposal to win more rescue money, dealing a setback to negotiations. The
European Central Bank's (ECB) rock bottom interest rates also left the
currency vulnerable to being used as a funding currency for bets on
higher-yielding currencies like the US dollar. As confidence in a Greek deal
wanes, party goers are often forced to buy back Euro as they unwind carry
trades. Upside for the Euro turned limited after Germany’s IFO survey of
business confidence weakened more than expected, hitting four-month lows.
Japanese
Yen was edging higher towards the 124-handle but broadly speaking it remains
in consolidative mode within 123.50-124.15 since early June in response to
Kuroda’s comments that stemmed the currency weakness. May’s Bank of Japan
minutes had muted impact on the currency as it contained no surprises or
hints of further easing measures with the board members fairly confident of
the 2% inflation target being reached around first half of FY2016.
Asian
currencies with an exception of Chinese Renminbi were ending the week on
bearish mode. Topping the losses were Korean Won followed by Singapore
dollar, Ringgit Malaysia and Taiwanese dollar. Korean won down 1.56% against
US dollar in response to weaker than expected June consumer confidence,
bearish bias of Japanese Yen that will undercut Korea’s export competitiveness
and continue concern over MERS over tourism, domestic consumption against a
backdrop of subdued inflation and high household debt (165% of disposable
income). Meanwhile USD/SGD that retreated towards the 1.34-handle proved
temporary with the pair bouncing higher above 1.3419 in reaction to May’s
consumer prices that showed headline inflation falling 0.4% – 7th straight
month of decline.
Ringgit
Malaysia fell 0.94% against US dollar on the back of higher cross SGD/MYR
that continued to trade above 2.800 level, easing of local equity and rising
cross default swap rate that rose above 130 points. However, the 1 month
USD/MYR volatility eased from 9.85% at start of the week to below 9.63%.
Ringgit which enjoyed a relief rally to 3.7330 levels on Wednesday on
headlines that Fitch kept Malaysia sovereign rating with negative watch
unchanged. Clarity was restored after Bloomberg puts up a headline from Fitch
Ratings confirming that rating review is still on-going and will conclude by
end-June. On the macro front, Leading Index (LI) fell in April 2015 by -0.6%
month-on-month( MoM) compared to +1.3% in previous month, led by contraction
in imports of Semiconductors, weaker housing market and decline in real money
supply.
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Market Movers for
the Week
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v From US: Pending Home Sales Y/Y (May),
S&P/Case-Shiller Home Price Y/Y (Apr), CB Consumer Confidence (Jun), ADP
Employment Change (Jun), ISM Manufacturing PMI (Jun), ISM Manufacturing PMI
(Jun), Average Hourly Earnings M/M (Jun), Unemployment Rate (Jun), Nonfarm
Payrolls (Jun), Factory Orders M/M (May).
v From Eurozone: Eurozone Economic Sentiment (Jun),
Eurozone Business Confidence (Jun), Eurozone Industrial Sentiment (Jun),
Eurozone Inflation Rate Y/Y Flash (Jun), Eurozone Unemployment Rate (May), ECB
Non-Monetary Policy Meeting, Eurozone Retail Sales Y/Y (May), Germany Inflation
Rate Y/Y Preliminary (Jun), Germany Unemployment Rate (Jun).
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v From Asia: Japan Industrial Production Y/Y
Preliminary (May), Japan Retail Sale Y/Y (May), Japan Average Cash Earnings
Y/Y (May), Japan Tankan Large Manufacturers Index (Q2 2015), China NBS
Manufacturing PMI (Jun), China Non-Manufacturing PMI (Jun), Korea Retail
Sales Y/Y (May), Korea Exports Y/Y (Jun), Thailand Inflation Rate Y/Y (Jun),
Indonesia Inflation Rate Y/Y (Jun), Malaysia Balance of Trade
(May).
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INDICATIVE MAJOR CURRENCIES
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