Maybank FX Asia Weekly - 15 Mar 2016

 

      Most of the USD/Asians were trading with a heavy bias over the past couple of sessions, helped by USD weakness and risk-supported sentiments (as a result of stable oil prices). Further downside though could be limited as US FOMC approaches and we can expect some consolidation to take place instead. USDSGD, which has seen some near-term downside bias, could bounce higher in the lead up to the MAS meeting in Apr as speculation increase on the MAS next move. USDSGD 1-month vols has started to climb higher from the beginning of Mar and could go higher in the lead up to the budget (24 Mar) and MAS meeting (sometime in the second week of Apr), providing an opportunity to long USDSGD. USDMYR’s downside bias could continue but further downside could be tempered by oversold conditions.

      Though we have BOJ on 15 Mar, all eyes will be on the US FOMC on Thu. Upside risk to the USD cannot be discounted even though a rate hike is not expected at this point. This is because a hawkish post-FOMC press conference could send the USD higher. This in turn could see the USD/AXJs climb higher from their current levels. This though is not our base case for now. Of note as well is that Premier Li Keqiang will speak on 16 Mar (Wed) and will be eyed for clues on the finer details of the supply side structural reforms.

      There are a handful of central bank meetings these two weeks aside from BOJ. BI meets on 17 Mar to decide on policy and we think that a further 25bp rate cut to 6.75% is likely to front-load its support for the economy. Further cuts to the BI reference rate would help to bring down borrowing cost and help to boost growth. This is followed by the BSP and BoT meetings on 23 Mar, where both are also not expected to adjust policy. Korea releases its final GDP print for 4Q on 25 Mar, while Vietnam’s 1Q GDP is on tap sometime 25 to 31 Mar.