Maybank GM Daily - 7 Mar 2014

FX

Global

·         ECB did not move as expected and forecast inflation at 1.0% this year, 1.3% in 2015 and 2016. President Draghi commented that data since the last meeting suggests recovery and requires no action from the central bank. EUR touched a high of 1.3873 against the USD overnight, still on the upmove this morning. BOE also voted to keep interest rate steady at 0.50% and held asset purchase scale at GBP375 bn. GBP/USD bounced at the decision before tapering off. Pair remained choppy in overnight session and was last seen around 1.6740.

·         Later in the session, US initial claims slipped to 323K compared to 349K (revised) in the previous week. Factory orders declined more than expected by -0.7%m/m in Jan though still a smaller fall than the previous -1.5%.  Equities finished mixed as well as DJI closed +0.4%, S&P at +0.25 and NASDAQ at -0.1%.

·         In late Asian hours on Thu, BNM also left overnight policy rate steady at 3.00%. Tone was rather neutral, quite like the last statement in Jan. Inflation risks are not much of a concern at the moment as the central bank expects cost inflation to be softened by benign external price pressures and softer domestic demand.

·         This morning, RBA Glenn Stevens reiterated this morning that AUD is still “high by historical standards”. His testimony to the House Economics Committee revealed concerns over household debt, acceleration in the fall of mining investment and some uncertainties on the rates outlook. AUD fell from its overnight on his words.

·         AXJs retained strength against the dollar ahead of NFP today. Consensus seems to be a much stronger 149K compared to the previous 113K and the softer ADP numbers released mid-week suggest that the actual payroll tonight might underwhelm. Market players seem to be adjusting forex positions against the USD as a result. We expect USD/AXJs to remain within current range before the release. On the side, US trade balance for Jan is also due.

G7 Currencies

·         DXY – Settling lower. The index was dragged lower by the strength of EUR and touched a low of 79.59. MACD shows strong bearish momentum on the 4-hourly chart. Price has been stable for the second half of NY session around the 79.70-mark. NFP is the data to watch and the consensus of 149K is much higher than the previous 113K though softer ADP numbers have likely moderated expectations. Hence, expect any number in between to be a non-event. A firmer than expected number would be a substantial upside surprise. Support for the day at 79.50.

·         USD/JPY – Sideways. Pair was squeezed higher beyond the 102.90-resistance but bullish momentum on the intra-day chart wanes as we write. We expect little action in Asian session and 102.80 to be a support for the day. 103.30 is the first barrier.

·         AUD/USD – Taking Profit. Pair bounced above the 0.91-figure before softening on Glenn Stevens’ words, last seen around 0.9080. However, even he admits that jawboning has lost its effect on the currency. The recent upside surprise in data may lend some support for the day above 0.90-figure.

·         EUR/USD – Bearish Risks Still.  ECB turned the table on the bears and EUR/USD printed a high of 1.3873 before leveling off thereabouts. Pair has now established a base at 1.3800 and we do not rule out more bullish moves by the pair. Next resistance level at 1.3895.

Regional FX

·         The SGD NEER trades 0.02% above the implied mid-point of 1.2641 with the top end estimated at 1.2388 and the floor at 1.2894.   USD/SGD – rangy.  The USD/SGD is wobbling this morning after yesterday’s engulfing bearish move. The pair is currently sighted higher at 1.2638 though momentum remains bearish. Price action today should see the pair hover between 1.2615/1.2678 today.

·         AUD/SGD – profit-taking.  The cross is taking a breather today as market profit-take after yesterday’s run-up above the 1.1500-region. The cross is currently hovering around 1.1482 with momentum still bullish. We look for 1.1525 to cap topside today and 1.1426 should be supportive.  SGD/MYR – range-bound with downside risks.  The cross is sliding lower this morning at 2.5758 on the back of MYR strength. Intraday chart is showing waning bullish momentum this morning. Rangy trades likely today with the bias tilted to the lower end of 2.5704/2.5854.

·         USD/MYR – Weighed. Pair slumped this morning and traded around 3.2555 as we write, not helped the least by the overnight dollar slump. MACD forest on the 4-hourly chart indicates strong bearish momentum for the pair. Next support at the 3.2396 (50% retracement of the Nov-Jan upswing. 1-month NDF steadied around 3.26, off its overnight low. BNM steady rate policy boosted the MYR strength. Malaysia’s trade numbers for Jan are due today.

·         USD/CNY was fixed lower at 6.1201 (-0.0048), vs. previous 6.1249 (+1.0% upper band limit: 6.1819; -1.0% lower band limit: 6.0595). CNY/MYR was fixed at 0.5321 (-0.00017).

·         USD/CNY – Choppy with downside bias. Pair slumped on the significantly lower fixing today, which was in line with the dollar slide overnight. Priced at 6.1035, action this morning after the fixing remained choppy within the rather wide range of 6.1010-6.1210.  MACD still bearish on the 4-hourly chart and next target in sight is 6.0970. Third day of NPC and local press reported that penalties for securities crimes may be raised to increase protection for SMEs.

·         1-Year NDFs – Bearish. The NDF slumped on the fixing and was last seen around 6.1460, piercing the top of the intra-day inchimoku cloud. MACD forest shows accelerating bearish momentum. More downside risks are seen but pair needs to get past the 6.1430-support before the next at 6.1300 can be targeted.

·         USD/CNH – Heavy. 4-hourly chart show bearish momentum still. CNH is trading at a premium to the CNY. Pair took out the 6.1103-support and was last seen pressing on the next support at around 6.0950. Break of that exposes the next support at 6.0851 (the bottom of the Ichimoku cloud) on the 4-hourly chart.

·         USD/IDR – still offered. The USD/IDR slid below the 11400-level this morning towards the next support at 11300 after opening higher at 11535. The pair is hovering around 11370 at last sight. 11565 currently on the back of dollar weakness overnight. Foreigners bought a net USD53.7mn in equities yesterday but lowered their holdings of government bonds by IDR0.04tn. With momentum increasingly bearish and with the pair in oversold territory currently, further moves southward is likely today and a move towards 11295 is possible today. The 1-month NDF spiked momentarily to 11495 before coming off to hover around 11420 this morning, higher than yesterday’s close of 11415, though momentum continues to point south. The JISDOR was fixed at a low not seen since 14 Nov 2013 at 11554 yesterday from 11580 on Wed. Indonesia’s central bank governor said that the YTD net capital inflow has so far exceeded the net inflows in 2013. He also expects foreign reserves, which will be released later today, to rise above USD102bn in Feb from USD100.65bn in Jan.

·         USD/PHP – downside.  The USD/PHP took out our support at 44.600 yesterday and is again on the downtick this morning. The pair is currently trading around the 44.505 region with momentum still pointing south. Downsides today is likely to be limited by 44.298 (100-DMA level), while resistance is likely at 44.600 today. The 1-month NDF dipped to close at 44.440 yesterday and is little changed this morning. Intraday chart is still showing bearish momentum this morning.

·         USD/THB – upside bias. The USD/THB is inching higher this morning around 32.260 at last sight. The pair appears to be correcting after sliding past the 100-DMA at 32.270 yesterday. Foreign funds buying, if it continues today like they did yesterday with a net THB8.3bn in bonds - the highest since 13 Feb - and a net THB1.0bn in equities bought, should help partially mitigate. Bearish momentum continues to be on the wane this morning and support should remain at 32.215 and 32.400 acts as resistance today.

Rates

Malaysia

·         Local government bonds market ended the session steady to a tad higher in a rather quiet market before the MPC meeting. Response was mild despite the MYR gained further to 3.2600 from 3.2700 at previous close. Longer-dated benchmark MGS and off-the-runs MGS continued to attract buying interest. At market close, 3-year benchmark MGS inched up 2bps to 3.25% while 15-year benchmark MGS eased 1bp to 4.55%. Meanwhile, SPK 2/24 eased by a further 1bp to 4.52% in a fairly active market.

·         In the rates market, ahead of the MPC meeting, we saw better payer on shorter end in decent sizes with the curve ended a tad higher.

·         The PDS market was quiet with a handful of trades being reported in GG sector on the short to mid-tenor papers of PASB, Khazanah and Danga. Short end YTL Power 14 was dealt at 3.52%. Next focus will be on the upcoming issuances for the month.

Indonesia

·         Indonesia central bank signed a bilateral local currency swap arrangement yesterday with central bank of Korea. This arrangement allows exchange of local currencies between two central banks of up to KRW 10.7 tn or IDR 115 tn which is designed to promote bilateral trade and further strengthen financial cooperation for the economic development of the two countries. The arrangement would have a three years effective period and could be extended by mutual consent of both sides. The

·         Indonesia bond market experienced a slight increase yesterday. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield continue shifting up to 7.813% (4.8bps), 8.070% (4.2bps), 8.589% (1.2bps) and 8.615% (4.4bps) respectively while 2-yr yield shifted up to 7.553% (0.4bps). Trading volume at secondary market was remains heavy amounting Rp15,174 bn (vs average per day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and FR0071 (15-yr benchmark series) remains as the most tradable bond during the day. FR0070 total trading volume amounting Rp3,752 bn with 130x transaction frequency and was last traded at 102.063 yielding 8.070% while FR0071 total trading volume amounting Rp2,902 bn with 138x transaction frequency and was last traded 103.426 at yielding 8.589%.

·         Indonesia Debt Management Directorate General (DMO) release bond ownership data as of March 5^rd, 2014 Foreign ownership proportion slightly declined by Rp40 bn to Rp344.90 tn (32.86% of total outstanding of government bond). Individual ownership increased by Rp19,330 bn as a result of SR-006 issuance.

·         On the corporate bond segment, trading volume was seen heavy with total trading volume amounting Rp880 bn (vs average per day trading volume of Rp750 bn). TBIG01ACN1 (Shelf registration subordinate sukuk Mudharabah I bank muamalat phase I year 2012; Maturity date: 29 Jun 22; Rating: AA-(idn)) was the top actively traded corporate bond yesterday with total trading volume amounted Rp90 bn and was last traded at 100.995 yielding 7.689%.

Rgds,

Maybank FX Research

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