Regional currencies received a boost this week, helped by a stable yuan
following the re-opening of onshore markets after the week-long Lunar New Year
celebrations in China. Support from the yuan came in the form of the PBOC
governor's recent public comments. He reiterated support for the USDCNY, given
its large foreign exchange reserves, and spoke of disallowing speculators to
dominate market sentiments as well as further renminbi
internationalization progress “in waves”. This should remove the CNY as a risk
factor in the near term and be supportive of the AXJ in the two-weeks ahead.
Oil could become a factor for regional currencies as well should the
agreement between Saudi Arabia and Russia to freeze output to current levels
pans out. However, we are of the view that the hurdle to this agreement remains
high as it is contingent on all the OPEC members acquiescing to it. Still,
should the agreement hold, this should not only stabilize oil prices and allow
oil prices to find support. Main beneficiaries in the region would be the MYR
and IDR. We could see these currencies climb higher as a result.
Relatively quiet week in Asia with just BI meeting on 18 Feb to decide
on policy. Our economic team is not expecting any moves this time round by the
BI but instead expects a primary reserve requirement cut of 50bps to ease
monetary policy and inject liquidity in the banking system. Singapore and Malaysia
release their GDP prints for 4Q sometime in 19-25 Feb and 18 Feb respectively
and we do not expect any significant impact on the SGD and MYR.
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