Maybank GM Daily - 4 Apr 2014

FX

Global

·         ECB did not move interest rates overnight. That drove a brief spike past the 1.38-figure before an equally sharp reversal to levels around 1.3720. President Draghi stressed that the central bank is determined to keep monetary policy accommodative and even highlighted discussions on negative deposit facility rates. EUR fell on his words.

·         Earlier in Asia on Thu, RBA Glenn Stevens spoke at Brisbane. He warned that it is still premature to know if handover from mining investment will proceed smoothly. We view the speech as an attempt to soften the AUD after he noted promising signs on the handover to a more domestic-led growth last week. AUD/USD slipped to lows of 0.92 levels before rebounding again.

·         There are a few releases of note in Asia including Malaysia’s trade numbers that are due after Philippine’s inflation figures later. The latter might determine policy maneuvers by BSP in its next meeting on 8 May.

·         The big event of the week occurs tonight as the world awaits NFP for a better indication of the labour market and economic recovery of the US. Overnight data releases did not help sentiments as the US trade deficit widened much more than expected to –USD42.3bn. Initial jobless claims also increased to 326K from the previous 310K. That explains the fall in NY indices. Nonetheless, the EUR weakness was able to keep dollar index elevated this morning.

·         Asian markets are expected to trade in caution, similar to their Western counterparts ahead of US jobs data. We expect the FX space to also be subdued and regional currencies to remain in their current ranges.

G7 Currencies

·         DXY – Upside bias. Overnight EUR weakness lifted the index to a high of 80.532 before leveling off to around 80.45. The 80.50-barrier is at risk at the moment.  Momentum indicators also flag bullish risks on the intra-day chart. The top of the intra-day ichimoku cloud now caps aggressive bids at 80.537. A break of this level exposes the next at 80.828.

·         USD/JPY – Downside risks. USD/JPY remained rather supported on Thu but bias is gradually tilting to the downside. Last seen around 103.90, pair could slip towards 103.60. A strong move below this level exposes the next support at 103.16. Topsides are guarded by Thu high of 104.11.

·         AUD/USD – Sideways. Pairing had been choppy within the 0.92-0.94 range. Strong barrier is seen at 0.9255 while downsides are slowed by recent low of 0.9206. MACD forest is still negative though paring downside momentum. A lack of impetus in this session could leave the pair within the current range. Next support is still some distance away at 0.9147. Topsides guarded by 0.9304. RBA Glenn Steven’s speech at Brisbane was less sanguine than his last. AUD remained nonetheless resilient.

·         EUR/USD – Downside risks. Pair slipped to around 1.3720 and was still hovering thereabouts as we write. ECB President Draghi reiterated that exchange rate is very important for price stability. That words coupled with considerations of negative deposit facility rates dragged on the currency. Asian session is expected to remain quiet  and next support is seen at 1.3695 while topsides are likely capped by 1.3746.

Regional FX

·         The SGD NEER trades 0.24% above the implied mid-point of 1.2665 with the top end estimated at 1.2412 and the floor at 1.2918.   USD/SGD – Supported.  The USD/SGD remained on the upward gyration with two-way interest seen. Still, risks remain to the upside as MACD continues to flag bullish momentum. 1.2620 is the first support seen, near the bottom of the Ichimoku cloud that the pair has just entered. Next support lies at 1.2605, marked by the base line. 1.2644 still slows bids.

·         AUD/SGD – Range-bound.  The cross is still trapped within the 1.1625-1.1698 range, last seen hovering around 1.1670. Intra-day momentum indicators show more room for upside, though next resistance is seen at around 1.1682. This barrier has been tested in the past few sessions. Upticks are likely to meet selling interest towards first support at 1.1642 ahead of the next at 1.1625.   SGD/MYR – Sideways.  The cross slipped from the 2.60-handle this morning though MACD still show slight upside risks. Two-way interest is at work here and we continue to see rangy action within 2.5964-2.6050.

·         USD/MYR – Settling into range. Pair is on the downtick, despite the overnight dollar upmove. Prices are caught within the thick of the clouds and we think dips could be shallow. First support is seen at 3.2810 while topsides are now guarded by the 3.29-figure. 1-month NDF is also within the Ichimoku cloud and paring bullish momentum. Pair is likely to remain supported within 3.2830-3.2965. Malaysia’s trade numbers are due today and exports growth is expected to moderate to an average of 10.6%y/y in Feb from the previous 12.2%. Imports growth is expected to quicken to an average of 14.2%y/y from previous 7.2%. That would increase the trade surplus to MYR 8.9 bn from the previous MYR6.36bn.

·         USD/CNY was fixed higher at 6.1557 (+0.0037), vs. previous 6.1520 (+2.0% upper band limit: 6.2813; -2.0% lower band limit: 6.0350). CNY/MYR was fixed at 0.5305 (+0.0004).

·         USD/CNY – Upside risks. Spot edged higher before easing to around 6.2140. Intra-day moves are likely with an upside bias  given the higher fixing. Within Asia, there is little to be wary about. 6.2305 marks the next resistance should there be a decisive move above the first barrier at 6.2177. Base is seen at 6.2030. The IMF warned in a World Economic Outlook report that China’s transition into a slower pace of growth could drag on growth in other emerging economies, at least in the short-term.

·         1-Year CNY NDFs – Upside momentum. The 1Y NDF was lifted above 6.2330-resistance and remained around 6.2360, lifted by the fixing this morning. 6.2405 guards the topside today and the break of this level exposes the next resistance at 6.2475. Offers to be slowed by 6.2210.

·         USD/CNH – Tentative Upticks. Pair extended upsides to around 6.2180 as we write but nonetheless still within 6.1920-6.2190 range. Intra-day momentum shows increasing upside momentum though daily chart shows that pair has likely peaked. Hence, whiel we do not rule out a move towards next resistance at 6.2266, upticks beyond that should be on short leash.

·         USD/IDR – Directionless. The USD/IDR pairing hovers around 11310, still within the tight 11295-11330 band that has been confining it. Positioning ahead of BI rate policy has already started with the decision due on 8-Apr. The upcoming parliamentary elections will also leave investors cautious. Next resistance is seen around 11360. The 1-month NDF leveled off from Thu morning highs to around 11360 as we write. Pair is paring bullish momentum and we expect pair to remain within the 11305-11380 range. After Wed fix at 11303, the JISDOR was set higher at 11310 yesterday.

·         USD/PHP – Bullish still.  The USD/PHP remains on the uptick with the pair currently sighted at 45.035. Momentum is still bullish, not helped the least by the ease in the price pressure noted in Mar. CPI slowed to 3.9%y/y from the previous 4.1%. Core inflation also slowed to 2.8%y/y from the previous 3.0%. 45.050 still guards topsides for the pair and a break of this level exposes the next at 45.10. The 1-month NDF softened to around 45.10. 45.13 guards topside. Next support is still at 44.95.

·         USD/THB –  Lofty. Pair broke above the cloud to trade around 32.50. We expect pair to remain elevated above the support seen at 32.49. Risks remain tilted north though RSI prints overbought conditions. Strong upmvoe above the 32.56 is required for bulls to establish a firmer foothold. Thailand’s consumer confidence index slipped to 58.7 in Mar from the previous 59.7, the lowest since Nov 2001. This was attributed to the ongoing political conflict that could drag on growth this year.

Rates

Malaysia

·         Local government bond yields ended a tad higher responding to a spike in UST yields on better print on economic data while a weaker MYR at the opening further compounded to the weak market sentiment. Prices opened on the defensive side with better sellers seen.  However, many continued to stay on the sidelines ahead of US Non-Farm Payroll. At market close, 3-yrs, 5-yrs, 7-yrs and 10-yrs benchmark MGS added between 1-2bps to close at 3.42%, 3.61%, 4.03% and 4.14% respectively.

·         Although marked to market-wise the IRS rates did not fluctuate much, there was a flurry of activity in the market today. 5-year traded multiple times at 3.99%, 4-year traded twice at 3.88% and 3-year traded twice at 3.78%. There were some spread trades; some receivers who capitalize on the high rates to initiate received positions; payers who paid to square off their corporate hedges. Today is the most liquid day for MYR IRS seen to-date. Basis further tightened as it seems dealers have been seeing offer side deals (dollar inflows) from clients lately.

·         The focus in the PDS market remained on high grades. Long-end Danainfra 33 traded in the range of 5.09-5.12%, a tight 37-40bps over MGS. A few AAA-rated papers with maturity in 2016 changed hands, including Putrajaya, BPMB and TTM,  all traded within the range of 3.72-3.81%.

Indonesia

·         Indonesia bond market moved mixed and slightly closed higher marking a 6 consecutive day incline. Investors are also looking for FX reserves data which is planned to be published today by the Indonesian central bank. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield slightly shifted up to 7.652% (1.6bps), 7.851% (0.2bps), 8.210% (0.1bps) and 8.414% (1.5bps) while 2-yr yield shifted down to 7.328% (1.3bps). Trading volume at secondary market remains heavy amounting Rp12,444 bn (vs average per day trading volume of Rp7,602 bn). SR006 (3-yr) and FR0070 (10-yr benchmark series) was the most tradable bond during the day. SR006 total trading volume amounting Rp3,179 bn with 1,559x transaction frequency while FR0070 total trading volume amounted Rp2,345 bn with 74x transaction frequency and closed at 103.563 yielding 7.851%.

·         On the corporate bond segment, trading volume decline to Rp557 bn on yesterday’s trading (vs average per day trading volume of Rp750 bn). FIFA01BCN3 (Shelf registration I Federal International Finance Phase III Year 2014; B serial bond; Maturity date: 30 Oct 2017; Rating: idAA+) was the top actively traded corporate bond yesterday with total trading volume amounting Rp65 bn and was last traded at par yielding 10.49797%.

Rgds,

Maybank FX Research

Global Markets

Maybank