FX
Global
§ NY session was calm on Fri with
modest gains clocked across indices. USTs were still well supported with only a
slight uptick in the 10-year yields 2.52%. Solid housing starts kept
trading sentiments buoyant, albeit tempered by a fall in Univ. of Michigan
Confidence.
§ Range-trading is likely to dominate
the FX space given the lack of data cues next week. Data calendar in the US is
light ahead of a long weekend. Fed speaks scatter across the week, punctuated
by the release of the Apr FOMC Minutes and Fed Yellen’s Speech. They are not
expected to unanchor rate expectations at the moment. Minutes will also be
released by BOE and RBA, followed by a BOJ meeting. Nearer to home, growth
numbers are due from Thailand and Singapore. China’s flash PMI-mfg could hold
some attention after many of its Apr data missed expectations.
§ Singapore and Malaysia’s Apr
inflation prints are also on the tap. No major surprises likely on that front.
Recent hunt for yields could benefit Asia, especially IDR and INR in the
near-term. We look for lingering Post-Modi victory euphoria to underpin INR
while hopes for a strong one-round Presidential election win by Jokowi and his
expanding coalition.
G7 Currencies
DXY
– Congestion. DXY
settled into a higher congestion area of 79.90-80.30. While MACD on the daily
chart shows bullish momentum, price action shows some pressure on the
79.920-support. For the week ahead, the bearish pressure on the EUR would
certainly be a bullish cue for the greenback. Any further moves to the upside
could be guarded by the 80.50-barrier. We see two-way risks to the greenback
with trend in the medium term a downward sloping one from its high on 21 Jan.
79.688 is the ultimate support for the week. Fed speaks are scattered across
the week, punctuated by the Fed Minutes on Thu and another speech by Fed Chair
Yellen.
USD/JPY
– Range-bound. USD/JPY
edged towards the lower bound of the 101.33-102.68 range. This range has been
confining much of its movements since Feb. 101.33 proved to be a strong support
for the pair, tested and remained intact for a while now. This week we have BOJ
meeting and markets are not expecting much action from the central bank. We
expect pair to remain with 101.33-102.68. Any tests to the downside should meet
next support at 100.77.
AUD/USD
– Sideways. Pair has been
snaking around within the 0.9220-0.9450 range. There appears to be some support
at 0.9320 ahead of the next at 0.9270 and little momentum on either side on the
daily chart. Pair is in a neutral state now, last seen at 0.9340. We continue
to see more two-way action within the 0.9270-0.9450 range. RBA will release the
Minutes of its May meeting tomorrow.
EUR/USD
– Pressured. Pair
was on the slide throughout last week, stabilizing around 1.3710 as we write.
As ECB officials continue to toy with various ways of monetary easing in Jun,
pressure is likely to remain to the downside for the pair. We see support
at 1.3625 while unexpected upticks could meet resistance at 1.3770. Key data
releases are skewed to the end of the week with Germany IFO numbers to note.
Regional FX
The
SGD NEER trades 0.28% above
the implied mid-point of 1.2541.
We
estimate the top end at 1.2292 and the floor at 1.2793. USD/SGD
– Upside Pressure. USD/SGD has been pressing on the 1.2540-barrier
more than once last week though is still within the 1.2450-1.2540 range that we
have been eyeing. Daily MACD shows increasing bullish momentum. The 18-DMA and
40-DMA is also closing in on a positive cross-over. We think risks are to the
upside for now, underpinned by soggy EUR and weaker risk appetite. Next barrier
is seen at 1.2596.
AUD/SGD
– Supported. AUD/SGD
steadied within 1.1668-1.1774. MACD shows an upside bias in the pairing with
support seen nearby at 1.1668. That could be easily broken to expose the next
at 1.1590. For a cross that has been trading in range, RSI flags near
overbought conditions. Upticks to be guarded by 1.1774. SGD/MYR – Two Way
Forces. The cross plunged
to a low of 2.5729 before recovering above the 2.58-handle, along with some
profit-taking on the MYR. Pressure remains on the downside according to the
MACD and this cross could remain heavy. The recovery is seen as consolidation
and we see consolidation to extend but risks are to the downside. A break of
the 2.5720-support to expose the next support level at 2.5639.
USD/MYR
– Consolidative. Pair
bounced within the 3.2170-3.2495 range this week. We see some consolidation
within 3.2170-3.2495 for the pair given the lack of momentum seen on the daily
chart. EM flows could benefit regional including the MYR and keep a check on
USD/MYR bids. 1- month NDF was also
pressured to the downside with a low seen at 3.2222. Support is still seen at
3.2220. MYR strength stemmed from a widened current account surplus in 1Q which
came in at MYR19.8bn or 7.7% of GDP. Growth in the quarter also picked pace to
6.2%y/y. This was above our estimate which was already at the firmer end of
consensus and thus prompted an upward revision of the annual growth to 5.4%
from the original 5.0% by our economic team.
USD/CNY
was fixed higher at 6.1636 (+0.0008), vs. previous 6.1628 (+2.0% upper band
limit: 6.2894; -2.0% lower band limit: 6.0427). CNY/MYR was fixed at 0.5203
(-0.0015). USD/CNY
–Range-bound. USD/CNY is last seen at 6.2335, paring daily bearish
momentum. Pressure is increasing to the upside, lifting spot towards the upper
bound of the 6.2170-6.2400 range. A break of the resistance at 6.2400 to expose
the next at 6.2466.
1-Year
CNY NDFs –Steady. The
1Y NDF steadied around 6.2350. There is little momentum on either side for this
pairing and we look for sideway moves to dominate within 6.2320-6.2428. A break
of either side to widen range-trading to 6.2256-6.2485.
USD/CNH
– Two-Way Risks. Pair
hovered around 6.2360 with daily MACD still pointing south. Price action shows
a gradual upward tilt. Mixed signals suggest little clarity on directional bias
for the pair. We expect pair to remain within 6.2185-6.2475. CNH trades at a steady
and narrow discount to CNY. There could a short period of calm for the yuan.
USD/IDR
– Downside Pressure. Spot
is pressing on the 11365-support this morning as IDR remain supported by
positive political climate at home. Pair is now oversold, as flagged by the
RSI. Downside momentum could drag pair lower but we reckon 11270 should suffice
to deter further aggressive offers. 11470 guards topside for the week. 1-month
NDF is also on the downtick, last seen at 11367. We pencil in a support for the
pair at 11305. The local press reported that Jokowi’s running mate will
be announced before Tuesday (20 May). So far, his party (PDI-P) has formed
coalition with National Democrat Party, National Awakening Party and Partai
Hanura.
USD/PHP
– Rangy. USD/PHP was
little changed this morning, still within the 43.50-43.80 range. The inability
to move out of this range caused the pair to lose much of its bearish momentum
on the dailyh chart. We see more sideway gyrations at the moment. 1-month NDF
eased to around 43.67 this morning. This pair is also losing downside momentum
as time passes. We look for two-way
action within the confines of 43.50-43.85. Philippines’ government wants to
raise the share of manufacturing sector of total economic output to 30% from the current 22%
by 2020, cited by the local press.
USD/THB
– Upside Risks. Pair
edged higher to around 32.53 this morning, ahead of the GDP release at 1030am
(HKT). Next barrier is seen at 32.670 and there is growing expectations
of a downside surprise in the growth numbers. Momentum is however lacking with
only a slight tilt to the upside. We see pairing to find minor support at
around 32.44. In fact, foreign bond holdings pared by 7.9mn on Fri. The Nation
reported that the Senate and anti-government protestors will urge the creation
of a “political vacuum” starting today. Protestors will attempt to force the
remaining ministers to resign in order for an unelected prime minister to run
the country.
Rates
Yields on local government bonds ended mixed to
slightly higher ahead of Malaysia’s first quarter GDP release. Many were on the
sidelines but better sellers were seen. At market close, yields on 3, 7 and
10-year benchmark inched up by 1-4bps to 3.51%, 3.91% and 4.00% respectively while
the 20-year eased by 1bp to 4.59%.
The IRS market is active today. Foreign banks were
seen receiving in short-end rates, probably taking profit after the recent
surge in rates post MPC statement. Local banks were more conservative and seen
paying across the curve in case the GDP numbers this evening exceed
expectations. Rates on 2, 4 and 5 years were traded at 3.71%, 3.89% and 3.96%
respectively.
The PDS market has seen interest on both buying and
selling. The focus is still on high grades like GGs and AAAs. Prasarana 2019
was dealt at 4.01% and 4.00%, which seems a little tight, at 34bps above MGS.
Khazanah 2024 appeared a good deal, being changed hands at 65bps above MGS, at
4.65%. Tanjung Bin Power 2020 seems cheap with its last done price at 4.65%, compared
to IJM 2020, at 4.63%, which is one notch lower than Tanjung Bin Power. This
could be due to scarcity premium on IJM name.
Indonesia
Yield
curve bull flattened on Friday’s trading as the announcement waited in regards
to Jokowi’s vice presidential candidate haven’t been revealed during the day.
Bond price hike resume supported by Golkar giving positive signals for joining
Jokowi’s coalition which will give and additional support by approx. 15% to
Jokowi current coalation strength of 34.71%. IDR currency and Indonesia stock
market were also experiencing similar positive trend during the day as IDR
currency appreciated by 34.25 points to Rp11,412.50 per USD while JCI index
increased by 39.94 points breaking the 5,000 level to 5,031.57. Politic dynamic
would continue to occur until May 20 (President and Vice President Candidate
registration). 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at
7.552% (-6.1bps), 7.885% (-10.3bps), 8.370% (-8.4bps) and 8.454% (-7.8bps)
while 2-yr yield shifted down to 7.229% (-2.8bps). Trading volume at secondary
market remains heavy with trading volume amounted Rp15,413 bn (vs average per
day trading volume of Rp7,602 bn). FR0070 (10-yr benchmark series) and SR006
(10-yr benchmark series) was the most tradable bond during the day. FR0070
total trading volume amounting Rp2,158 bn with 80x transaction frequency and
closed at 103.287 yielding 7.885% while SR003 total trading volume amounted
Rp1,895 bn with 66x transaction frequency and closed at 102.469 yielding 7.764%.
On
the corporate bond segment, trading volume was relatively thin amounting Rp335
bn on Friday’s trading (vs average per day trading volume of Rp750 bn).
BCAF01CCN1 (Shelf registration I BCA Finance Phase I Year 2012; C serial bond;
Rating: idAAA) was the top actively traded corporate bond with total trading
volume amounting Rp75 bn and was last traded at 98.76 yielding 8.9472%.
Rgds,
Maybank FX Research
Global Markets
Maybank
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