FX
Global
Overnight equity indices bounced to record highs upon the Fed’s decision
to stay the course despite a lowered growth forecast. S&P closed at its
historic high of 1956.98, up +0.8% for the session and 6.0%ytd on Wed night.
DJI was up +0.6% for the session, accompanied by NASDAQ at +0.6%.
Earlier on Wed, Minutes of the BOE meeting on 5 Jun was released. The
vote to keep rates steady was unanimous but more policy makers believe that a
rate hike could be sooner than market expectations. GBP/USD revisited the
1.70-figure before leveling off, still hovering close to the key psychological
barrier.
This morning, New Zealand’s 1Q GDP came in softer than expected at
1.0%q/q, steadying from the quarter prior. Year-on-year growth accelerated to
3.8% from previous 3.3%. NZD softened from overnight highs to around 0.8715
against the dollar as we write this morning, likely to remain under slight
bearish pressure for the rest of the day.
The US has more data releases today including the usual weekly initial
claims, Philly Fed and the leading index. We do not expect these to have much
hold over the greenback as investors continue to digest the market-friendly
FOMC statement. In Asia, expect markets to take the cue from the west. Early
starter Nikkei is already in the black, albeit small. BSP decides on overnight
borrowing rate today with some expecting a rate hike. Decision could be a close
call. Philippines will also release its BOP figures today.
G7 Currencies
DXY – Two-Way Risks. The dollar index gapped down this morning and hovered
around 80.390 as we write. The Fed is determined to stay the course despite the
lower growth forecast for the year. This boosted confidence that the economy is
still on track for recovery despite the initial soft patch in 1Q. The
volatility index is back to near record lows while equity indices soared to
historic highs. The Fed has effectively allowed more risk-taking and carry
plays to extend a while more. 10-year yields pulled back to sub-2.6% levels,
dragging the greenback along. Despite the upbeat reaction, the pullback in
the dollar failed to test the 80.275-support and is likely to remain above the
80-figure. As markets brace for the end of the QE, dips in the USD are likely
to remain shallow with the barrier at 80.681 intact for now.
USD/JPY – Two-Way Trades. USD/JPY is wobbly in the Asian open, after sliding
overnight on the back of lower US Treasury yields post-FOMC. Pair is currently
hovering below the 102-level around 101.94 from yesterday’s close of 32.450.
Momentum indicators, including MACD, have now flat-lined, suggesting little
directional cues for the day ahead. Still, dovish post-FOMC conference and weak
trade data yesterday could put downward pressure on the pair. We look for
two-way trades for the day ahead with the pair consolidating within the lower
half of the 101.76-102.20 trading band today.
AUD/USD – Supported. AUD/USD touched a low at 0.9322, the top of the daily
Ichimoku cloud before making a big leap above the 0.940-figure, underpinned by
the FOMC statement. The Fed’s dovish stance has allowed AUD to retain its
strength for a while more. Intra-day, the MACD shows increasing bullish
momentum even the currency softens from its overnight highs in initial trades.
Expect the currency to remain supported above the 0.9380 for much of intra-day
trades today. Topsides are now guarded by 0.9424/0.9450.
EUR/USD – Capped. EUR/USD edged higher, breaking above the upper bound of the
1.3503-1.3586 range that has been confining the pair. Last seen around 1.3590,
the pair is still gaining bullish momentum though we suspect the pair needs a
stronger and sustained move above the 1.36-figure for more upsides. RSI shows
near overbought conditions and upmove could meet more resistance than most of
other majors, given ECB’s easing bias. Interim barrier is seen at 1.3617 while
1.3536 supports.
Regional FX
The SGD NEER trades 0.78% above the implied mid-point of 1.2586. The top
end is estimated at 1.2337 and the floor at 1.2836.
USD/SGD – Mild Rebound. USD/SGD is on the rebound this morning after the
overnight bearish engulfing move post-FOMC. Last sighted below the 1.2500-level
at 1.2493, momentum indicators are now increasingly tilted to the downside,
suggesting upside could be capped today. With our support at 1.2516 taken out,
nearby support is still around 1.2482 before 1.2451. Resistance is seen around
2.540 today.
AUD/SGD – Bullish Momentum. AUD/SGD is wobbling this morning after
yesterday’s bullish engulfing move post-FOMC. Cross had hit a high of 1.1752
before easing slightly to close at 1.1748. With the cross now hovering above
the ichimoku cloud, 1.1730 should provide support today. Next hurdle is seen
around 1.1780. SGD/MYR – Still Consolidating.
SGD/MYR is sliding this morning, underpinned by mild MYR strength. Cross is
currently sighted around 2.5762 with intraday MACD forest hovering just
slightly above to the zero line, which suggests limited downside today. Price
action then should see the cross remain in consolidative trade within
2.5665/2.5940 today.
USD/MYR – Rangy. Pair gapped down to levels around 3.2180 this morning, catching up with
the overnight action. This pairing has pared much of its bullish momentum and
may remain in rangy-trades within 3.2115-3.2275 this morning. 1-month NDF was
dragged lower by the dollar pullback last night and steadied around 3.2235 as
we write. Nonetheless, this pairing gains bearish momentum as we write,
signalling downside risks for itself as well as spot in intra-day trades. Eyes
are on CPI tomorrow which could swing the pair in this period of low
volatility. A firmer print than the expected 3.3%y/y could trigger more USD/MYR
offers ahead of the next BNM meeting on 10 July.
USD/CNY was fixed lower at 6.1531 (-0.0028), vs. previous 6.1559 (+2.0%
upper band limit: 6.2787; -2.0% lower band limit: 6.0325). CNY/MYR was fixed at
0.5201 (-0.0013). USD/CNY – Range-bound. USD/CNY drifted lower to levels around 6.2250, weighed
by the lower fixing though the pair is still having slight bullish momentum.
Pair is on its way to test the support at 6.2230 that could expose the next support
at 6.2096. Barrier is seen at 6.2335. China’s Premier Li Keqiang said
China will avoid hard landing and he assures a minimum growth rate of 7.5% to
ensure job creation. He reiterated that the country will count on “smart and
targeted regulation” rather than strong stimulus (BBG). This came after PBOC
announced plans to create a new monetary tool called “Pledged Supplementary
Lending” to aid the control of monetary base and guide medium-term interest
rates.
1-Year CNY NDFs – Range-bound. Overnight action was chopy for this pair with a slip
to a low of 6.2305 followed by more zigzag action that leaves the pair hovering
around 6.2330. Topsides are likely to be capped by the lower fixing today
though choppy action suggests buying interests as well. Hence, we expect
intra-day action to remain within 6.2256-6.2434 with a downward tilt.
USD/CNH – Downside Risks. USD/CNH slipped along with the NDFs and waffled
around 6.2262. Price actions showed more selling interests in this pair compared
to the NDFs and we see more downside risks as well. Support is seen at 6.2193
while the barrier at 6.2300 may slow bids.
USD/IDR – Congestion. USD/IDR is correcting after yesterday’s bullish run
that saw an attempt to close above the 12000-level. Yesterday, foreign funds
bought a net USD194.22mn in equities that helped keep the IDR supported.
Similarly, market whispers yesterday suggested BI intervention to cap IDR gains
yesterday. Pair is currently edging lower around 11935 this morning, though momentum
remains bullish. Still dollar weakness overnight is likely to weigh on the pair
today and this should keep the pair in consolidative trades within 11831-12055
today. 1-month NDF slid in the NY session to close below the 12000-level but is
currently on the uptick, hovering around 11979 currently. Still, intraday MACD
has flipped and is now showing bearish momentum ahead, which could cap upside
today. Not surprisingly given yesterday’s bullish momentum, the JISDOR was
fixed higher at 11978 yesterday from Tue’s fixing of 11863. The Indonesian
Parliament approved the revised state budget for 2014 this morning, in which
the budget deficit was set at 2.4% of GDP, revenue at IDR1635.38tn, spending at
IDR1876.8tn and tax revenue at IDR1246.1tn.
USD/PHP – Correcting. USD/PHP is on a bearish engulfing move this morning,
plunging to 43.885 currently from yesterday’s close of 44.127, helped by dollar
weakness overnight. Still, momentum indicators remained tilted to the upside,
suggesting further downside moves could be limited. Price action should see
support nearby at 43.855 before the next at 43.695, while 44.150 continues to
guard topside today. The 1-month NDF slipped below the 44.000-level in the NY
session to 43.840 but is on the uptick this morning at 43.90 with momentum
indicators tilted to the downside today. BSP policy meeting is eyed today and
an overnight borrowing policy rate pat at 3.50% today. Meanwhile, the BSP
governor has hinted that the central bank could raise its CPI forecast as
inflationary pressures are rising even as inflation remains within target.
USD/THB – Bearish. USD/THB is continuing on its slide this morning post-MPC and post-FOMC.
Pair was last sighted around 32.413 with momentum indicators showing
dissipating upside risks and the pair edging closer to oversold conditions
today. Foreign investors continued to dump equities, selling a THB2.73bn in
equities yesterday, offsetting the net THB997.22mn in bonds purchased. With the
markets focused on the economic recovery expected in 2H, further downsides
seems likely today with 32.355 still providing support. As expected, the BoT
left its benchmark interest rate unchanged at 2.00% on signs that the economy
is on the rebound after the coup. Our economic team expects the BoT to keep its
key policy rate on hold for the rest of the year in light of possible
oil-induced inflation and given the economic recovery roadmap. At the same
time, the BoT lowered its 2014 GDP growth outlook to 1.5% (vs. Maybank’s 2.5%)
from 2.7% previously but revised upwards its 2015 forecast to 5.0% from 4.8%
previously.
Rates
Local government bonds ended the session unchanged to slightly lower in
a subdued and passive market. Market continued to be cautious after a weak MYR
and UST performance throughout Asian trading hours. WI MGS 3/17 was quoted at
3.50%-3.43% compared to 3.47%-3.42% in previous session but with muted
response. At market close, yield on the 30-year benchmark MGS ended lower at 4.74%
on renewed buying interest.
In the IRS market, 1-year traded at 3.65% and 2-year traded at 3.75%.
Receiving interest was apparent throughout the curve but more so in the short
end 1-2 years. 3M KLIBOR remained stable at 3.52%.
In the PDS market, high grades were the focus of the day. Government
guaranteed names like Govco, Khazanah, and Prasarana was dealt in decent size
mainly along the 7-10 years bucket. High grade AAA names were also sought after
with Cagamas, Celcom, and Bank Pembangunan traded near MTM.
Singapore
SGS yields rose in tandem with the rise in USD rates overnight but
activity remained low. Overall, bonds were well supported with short
covering seen in selective issues at the opening, lending a supportive tone to
the market. Better bids were seen in long-dated issues including the 10,
15 and 20-year benchmarks. At market close, SGS yields were higher by 1-3bps
with a slight steepening bias, whereas IRS rates were marked higher by about
2-3bps from the 2-year point onwards.
In the USD credit space, Wheelock Finance Limited opened book for a
3-year piece with guidance of T+220bps, and the final guidance tightened to
T+192.5bps on an overwhelming book size of more than USD3b. The issue is capped
at USD500m. We expect the issue to trade even tighter as the real estate
company seems to be well received by private banking clients.
Indonesia
Indonesia to conduct debt switch auction today with all four benchmark
series bond (FR0069, FR0070, FR0071 and FR0068) as its destination bond and
offers eleven source bond series with maturity between 2014 – 2019. In the last
debt switch auction (end of March), DMO received Rp4,886 bn incoming bids and
only awarded Rp3,420 bn. We do see that incoming bids during the auction today
would be somewhat similar with the previous debt switch auction.
Bond market closed lower on yesterday’s trading session on the concern
of higher revised budget deficit (2.4% of GDP from 1.7% of GDP), Rupiah
depreciation and FOMC result. Hence, there weren’t any panic selling occurring
from investors as the higher budget deficit revision plan has been mentioned
several months earlier. Foreigners and local bank was seen buying on dips.
5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.729% (+2.8bps),
8.097% (+4.6bps), 8.485% (+3.5bps) and 8.666% (+4.5bps) while 2-yr yield
shifted down to 7.280% (-0.5bps). Liquidity remains persist as trading volume
at secondary market remains heavy amounting Rp11,475 bn. FR0042 which is the
13-yr off the run series and FR0071 (15-yr benchmark series) was the most
tradable bond during the day. FR0042 total trading volume amounting Rp2,690 bn
with 24x transaction frequency and closed at 113.689 yielding 8.490% while
FR0071 total trading volume amounted Rp1,775 bn with 54x transaction frequency
and closed at 104.266 yielding 8.485%.
On the corporate bond segment, trading volume was seen thin amounting
Rp430 bn yesterday (vs average per day trading volume of Rp750 bn). SSIA01B
(Surya Semesta Internusa I Year 2012; B serial bond; Rating: idA) was the top
actively traded corporate bond with total trading volume amounting Rp60 bn and
was last traded at 99 yielding 9.6478%.
Rgds,
Maybank FX Research
Global Markets
Maybank
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