Weekly FX Update, 10 March 2014

Good Morning!

v  Fed attributed the recent batch of weak economic data to the harsh winter weather in its latest Beige Book review and noted that the economy in most districts grew in February v  Euro zone continued to showed signs of recovery with the final aggregate PMI manufacturing for February printing 0.2% higher to 53.2 v  Chinese Renminbi recovered some of its past week losses by gaining 0.48% v  Ringgit Malaysia followed the general trend in the Asian currencies, posting a gain of 0.48%

Fear driven volatility which flared up last week ebbed after Russia eased tensions with Ukraine and the West, allowing markets to focus on upcoming economic data and central bank policy meetings. In the US, focus is on with the release of the February US non-farm payrolls on Friday. Federal Reserve Chairman Janet Yellen noted that many Americans are still unemployed or are forced to work part time at her ceremonial swearing-in event and vowed to do more to achieve the Fed’s unemployment and inflation targets. Jobs data momentum heading into Friday remained weak with ADP employment report showing private sector employers adding fewer-than-expected 139,000 jobs in February (consensus: 159,000) while the employment sub-index of the non-manufacturing ISM weakened sharply to 47.5 in February. However, the Fed attributed the recent batch of weak economic data to the harsh winter weather in its latest Beige Book review and noted that the economy in most districts grew in February. Positively, the ISM manufacturing index bounced back in February to 53.2 from 51.3 in January. The Euro recovered from a low of 1.3643 touched last week after Russia’s President Vladimir Putin said the need for military intervention in the Ukraine had dissipated at present. The Euro zone continued to showed signs of recovery with the final aggregate PMI manufacturing for February printing 0.2% higher to 53.2. Despite the February’s Eurozone inflation of 0.8% year-on-year coming in below the European Central Bank’s (ECB) target of 2.0%, ECB left its benchmark interest rate at 0.25%. In the post-meeting press conference, ECB President Mario Draghi said inflation is expected to rise gradually to 1.7% in the fourth quarter of 2016. The upbeat outlook prompted the euro to hit a 2-month high against the US dollar. Elsewhere, in the UK, the Bank of England also maintained its official bank rate at 0.5% and maintained its bond-purchase stimulus target at 375 billion pounds. Asian currencies strengthened against the US dollar during the week on receding risk aversion fears and reduced concerns on China’s growth. Indonesian Rupiah is the best performer, rising 1.07%, followed by the Thai Baht with a gain of 0.84% and a 0.73% gain in the Indian Rupee. The Chinese Renminbi recovered some of its past week losses by gaining 0.48%. The Chinese annual parliament meeting began this week with Premier Li Keqiang saying China will maintain its economic growth target of 7.5% for 2014, favouring reforms and rebalancing of the economy towards domestic demand. Inflation is targeted around 3.5% for 2014, broad M2 money supply is to increase by 13.0%, and fiscal deficit will be kept at 2.1% of GDP. Meanwhile, the National Development and Reform Commission briefed that fixed asset investment growth is targeted at 17.5% this year, the slowest rate in 12 years Ringgit Malaysia followed the general trend in the Asian currencies, posting a gain of 0.48%. The 1-month NDF rate broke through the immediate support level of 3.2700 to trade around the 3.2660 region. On the macro front, Bank Negara Malaysia kept its Overnight Policy Rate at 3.0%. Although inflation is expected to creep up, inflationary pressure is projected to be contained due to moderating domestic demand while global economic growth is expected to remain soft due to macroeconomic policy adjustments and geopolitical developments overseas. Market Movers for the Week v  From US: Fed’s Plosser & Evans speak, NFIB small business survey (Feb), JOLTs (Jan), Retail sales (Feb), Business investories (Jan), PPI (Feb), University of Michigan consumer confidence (Mar P). v  From Eurozone: Eurozone Industrial production (Jan), ECB’s Praet, Coeure, Mersch speak, ECB publishes monthly report, Employment (Q4), UK Industrial production (Jan), NIESR GDP estimate (Feb), Trade (Jan), Construction output (Jan), Germany Labour costs (Q4), CPI (Feb F). v  From Asia: China New Yuan Loans (Feb) (10-15 Feb), Retail sales (Feb), Industrial production (Feb), Japan Current account (Jan), GDP (Q4 F), BoJ policy meeting, Machine orders (Jan), Industrial production (Jan F), South Korea Unemployment (Feb), BoK policy meeting, India Trade (Feb) (10-17 Mar), Industrial production (Jan), CPI (Feb), Philippines Unemployment (Jan), Thailand BoT policy meeting, Indonesia BI policy meeting, Malaysia Industrial production (Jan), Singapore Unemployment (Q4 F), Retail sales (Jan). INDICATIVE MAJOR CURRENCIES Last Close 8.30 am Snapshot        Bid                   Offer Expected Ranges for Today         Low                       High USD/MYR 3.2578 3.2630 3.2810 3.2530 3.2980 JPY/MYR (100) 3.1562 3.1580 3.1830 3.1400 3.2100 SGD/MYR 2.5692 2.5710 2.5960 2.5600 2.6200 EUR/MYR 4.5228 4.5250 4.5610 4.5000 4.6000 AUD/MYR 2.9512 2.9530 2.9830 2.9300 3.0100 GBP/MYR 5.4516 5.4580 5.5030 5.4300 5.5400 USD/JPY 103.22 103.10 103.30 102.70 103.70 EUR/USD 1.3883 1.3870 1.3900 1.3830 1.3940 AUD/USD 0.9059 0.9050 0.9090 0.9020 0.9120

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FX Research & Strategy

AmBank Group Markets

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