Maybank GM Daily - 11 Apr 2014

FX

Global

·         BOE left monetary policy unchanged last night and GBP took a shallow dip against the USD. Pair was back around 1.6770 in early Asian hours. In NY session, initial claims slipped to 300K for the week ending on 5 Apr. That provided the dollar little relief as the index waffled around 79.39 as we write. Risk aversion owed to the upcoming earnings saw flight to safety. 10-year yields slipped under 2.65%, dragging the greenback lower.

·         BOJ released its minutes for its Mar 10-11 meeting this morning. Board members expect exports to rise moderately although some noted that structural factors could have contributed to the current lack of momentum in exports growth as Japanese manufacturers shift their production sites overseas, warning that weakness in exports could remain.

·         USD/AXJs are expected to trade in range with a downward tilt, weighed by dollar weakness still. Caution should keep downsides supported.

·         Tech stocks were particularly under pressure in NY session on Thursday amid concerns of overvaluation. NASDAQ slumped -3.1%, S&P was down -2.1% and DJI finished at -1.6%.

·         Early starter Nikkei is down -2.9%, weighed by risk aversion. USD/JPY slumped overnight, poised for the fall in equities. The rest of Asian markets are likely to trade in caution. We expect FX space to be caught in two-way interests.

G7 Currencies

·         DXY – Heavy. The index drifted to levels around 79.40 as we write, approaching the 79.268-support that has remained intact for a while now. Dollar remains away from the limelight at the moment. A sustained move below the 79.268-support is required for more downsides to be established.

·         USD/JPY – Downside risks. USD/JPY slumped on risk-off and broke below the 101.55-support. Momentum indicators show downside momentum and we expect prices to remain heavy. Risks are to the downside with next support seen at 101.29.

·         AUD/USD – Correction. The pair was unable to venture much higher and soften below the 0.94-figure, weighed by risk aversion. Further offers to be slowed by 0.9340-support while 0.9450 guards topsides. We expect pair to remain within the range in wait for a stronger impetus.

·         EUR/USD – More Upsides. Pair edged higher on further dollar weakness and hovered around 1.3890 as we write. Some support is seen nearby at 1.3876 while topsides remain guarded at around 1.3914. MACD shows bullish momentum while RSI steadies at 83. We think risks are still to the upside. Break of 1.3914 reveals the next barrier at 1.3930.

Regional FX

·         The SGD NEER trades 0.48% above the implied mid-point of 1.2568. The top end is estimated at 1.2318 and the floor at 1.2818.   USD/SGD – Wobbly. The USD/SGD is on a slight uptick this morning, hovering back above the 1.25-level at 1.2505 currently. Still with the MAS meeting coming up on Mon, there should be little momentum in either direction. Pair should trade within the 1.2457/1.2530 range today.

·         AUD/SGD – Bearish tone.  After climbing to an intraday high of 1.1801 yesterday, the pair is on the slide this morning. Hovering around 1.1733 currently, 4-hourly MACD forest is still showing waning bullish momentum, suggesting future moves lower seems likely. Next support is seen at 1.1685, while resistance is likely at 1.1801.  SGD/MYR – Bullish.  The cross is climbing this morning on the back of MYR weakness. Last sighted around 2.5889, the next target is seen at 2.5936. Risks remained on the downside but are dissipating with MACD just off the zero line. Support is at 2.5806 today.

·         USD/MYR – Downside Momentum. Pair touched a low of 3.2150 before rebounding on profit-taking. Pair has now edged higher towards the 3.24-figure. Next barrier is seen at 3.2495 while downsides are slowed by 3.2230. MACD shows paring bearish momentum and a failure to get above the 3.2495-resistance could mean a stronger pullback later. MYR weakness was due to some profit-taking in the local bonds market. 1-month NDF hovered around 3.2420, increasing bullish momentum. Next resistance is seen at 3.2522. Malaysia’s Feb industrial production for Feb reached 7-month high of 6.7%y/y. Average growth for Jan-Feb is 5.1%y/y, picking pace from 2.8% in 4Q 2013. This points to an even stronger real GDP growth for the first quarter, according to our economics team.

·         USD/CNY was fixed a tad lower at 6.1495 (-0.0015), vs. previous 6.1510 (+2.0% upper band limit: 6.2750; -2.0% lower band limit: 6.0289). CNY/MYR was fixed at 0.5238 (+0.0019).

·         USD/CNY – Still Holding Steady. The fixing a tad lower and spot remained within the 6.1930-6.2030 range as we write. MACD shows paring bearish momentum and break on the topside exposes the next stronger barrier at 6.2305. China’s Premier Li Keqiang commented on Thu that China will maintain GDP growth in reasonable range and that the economy has gotten off to a stable start (BBG). He also stressed that no short-term stimulus will be used. China’s CPI firmed to 2.4%y/y in Mar, accelerating from 2.0% previously. PPI fell more than expected by -2.3%, also a steeper decline than the previous 2.0%.

·         1-Year CNY NDFs – Rangy. The 1Y NDF bounced to the higher end of the 6.2160-6.2405 range, now pressing on the higher bound. Direction is unclear for the moment as the pair has been within range though MACD indicator on the intra-day chart flags bullish risks.  Next barrier is seen at 6.2475 while downsides are slowed by 6.2330 for now.

·         USD/CNH – Room for upsides. Pair edged higher but bids met selling interest and pair is hovering around 6.2100 as we write. Momentum indicators show upside risks on the 4-hourly chart. Topsides now guarded by 6.2186.

·         USD/IDR – Increasingly bullish. The USD/IDR gapped higher again at the opening to 11428 as the lingering effects of a weak PDI-P win and profit-taking continue to take a toll on the pair. Pair is last sighted hovering around 11445 with the next immediate target seen at 11450. Momentum is increasing bullish with the pair currently in overbought conditions. The sustained break of the 11340-barrier suggest further moves above 11450 could be likely with a more bullish target seen at 11500. The 1-month NDF shot to close at a high not seen since 6 Mar at 11570 yesterday and is edging lower this morning but remained above the 11500-level at 11550 currently. Momentum is increasingly bullish. The JISDOR was fixed higher yesterday at 11342 after closing for the parliamentary elections on Wed.

·         USD/PHP – Still supported. After yesterday’s bearish engulfing move following export outperformance, the USD/PHP is bouncing higher this morning on the back of mild dollar strength. Pair is currently sighted around 44.415 though risks continue to be tilted to the downside. We look for the pair to hover within the confines of 44.150/44.555 today. The 1-month NDF is inching slightly higher to 44.450 this morning from yesterday’s close of 44.420 with bearish momentum almost dissipating.

·         USD/THB – Upticks. The USD/THB is on the uptick this morning following mild dollar strength overnight. The pair is currently sighted around 32.320 with risk tilted to the upside. Unlike yesterday where foreign funds bought a net THB0.8mn and TH9.8bn in equities and government bonds, global risk aversion could see a sell-off in Thai asset today. Moreover, the protracted political crisis continues to keep the pair supported. Immediate resistance is around 32.370 before 32.410. Support is seen around 32.225.   Thailand’s Commerce Ministry continues to expect inflation to come in at 2-2.8% this year and for exports to rise by 5%.

Rates

Malaysia

·         Yields on local bond market slipped further in reaction to stronger MYR which touched 3.2170 from 3.2260-90 at previous close. At some point the 7 and 15-year slipped 4-6bps to 3.90% and 4.41% respectively but yields rebounded on profit taking activities as MYR gradually weakened to 3.2330. At market close, 3, 5, 7 and 15-year benchmark MGS slipped by 1-3bps to 3.39%, 3.57%, 3.93% and 4.44% respectively. Meanwhile, BNM announced a lower-than-expected MYR1.5b issue size for the reopening of 15-year GII. WI was quoted at 4.58% bid but with muted response.

·         IRS opened and closed with very little movements. IRS need not budge lower although MGS yields fell around 5bps in the morning and yields closed lower. The stronger MYR also failed to drag the rates any lower. 5-year IRS dealt at 3.95%. 3M KLIBOR added 1bp from 3.33% to 3.34%.

·         Focus in the PDS market are still very much on short-dated papers. Even though there was a short rally in MGS, it did not induce investors to commit to longer duration papers. Prasarana 28 was done at 4.92% and so was Danainfra 28 at around the same level of 4.91%.

Indonesia

·         IDR bonds market opened in weak tone in line with weaker in IDR currency and lower on JCI index over uncertainty after quick counts on legislative election yesterday. Yield changes higher by 5 to 7bps in the morning session, 10Y Traded to 7.9%. After break time, bid come back from foreign names erasing some of losses. 10Y traded back to 7.76%, 20Y traded to 8.32% and 15Y Traded to 8.13%. At the end of trading time, prices still lower 25-50bps compare to Tuesday closed or yield higher by 1/7/3/2bps on 5/10/15/20Y. Closing Level for 5/10/15/20 IDR government bond were at 7.61%/7.87%/8.19%/8.38%.

·         Next auction will be on Tuesday 15th April 2014 with target amount is 8T , series to be sell are 3mo SPN, 1Y SPN, 10Y FR70, 15Y FR71 and 20Y FR68.

·         Foreign ownership of government bonds reached IDR368.12tn or 34.05%of total as per 8 April.

Rgds,

Maybank FX Research

Global Markets