FX
Global
Dollar retained its late Asian gains throughout most
of NY session, underpinned especially by soggy EUR. There was little focus
overnight with Fed Chair Yellen offering little cues in the final day of her
testimony. She expressed uncertainty about the timing of the “ultimate
increase in rates” and will monitor upcoming data. Upon the release of the
Beige Book, the Fed reported modest to moderate growth in most districts amid
robust consumer expenditure and decent growth in manufacturing. “Robust to
very strong” auto sales were seen in a third of the 12 districts monitored.
Equity indices were buoyed by earnings reports. DJI
was up +0.5%, S&P at +0.4% and NASDAQ at +0.2%. 10-year yields were stuck
in range, last seen around 2.52%. Key release for today is perhaps CPI from
the EU. A softer print could drag on the EUR crosses further. Fed Bullard
speaks tonight though more hawkish comments are unlikely to unanchor the
expectations of rate, not after Yellen’s testimony. Buoyant mood extends into
Asia with Nikkei and Kospi in the black. Equity-related inflows in the region
should limit USD/AXJs upmove. Singapore’s non-oil domestic exports (NODX)
shrank more than expected by -4.6%y/y, though still an improvement from the
previous decline of -6.6%. Sequentially, the NODX actually grew 1.5%q/q in
Jun. The electronics component recorded a larger-than-expected fall of
-17.4%y/y, steeper than -15.3% seen in May. USD/SGD bears were relatively
unperturbed, pressing the pair lower, in line with most USD/AXJs. Exception
at this point is perhaps the THB which depreciated 0.1% against the dollar.
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G7 Currencies
DXY – Bullish Tilt. The greenback rose
against most majors, touching a high of 80.577 before levelling off into Asia
morning. The index is now on its way to test the 80.681-barrier though
momentum indicators show some deceleration in the bulls. EU releases its CPI
barrier in late Asia today and expect the greenback to remain buoyant within
range with support now seen around 80.3750 for intra-day trades. Initial
claims are also due tonight followed by Fed Bullard’s speech on monetary
policy in Kentucky.
USD/JPY – Waning Bullish Momentum. USD/JPY continues to trade in a tight
range within 101.30-101.76. After yesterday’s failed attempt to break the
101.76-barrier, the pair slid lower. Currently, the pair is hovering around
101.63 with bullish momentum waning as indicated by intraday MACD. 101.76
continues as barrier today ahead of 102.20. 101.30 should again limit
downside today.
AUD/USD – Double Bottomed. AUD/USD touched a low of 0.9330 before
rebounding higher to around 0.9365. This pairing has formed a double bottom
in Asian hours yesterday and a near-term bullish target could be seen at
around 0.9423. MACD forest has pared almost all bearish momentum on the
4-hourly chart and risks are tilted to the upside. That said, firm dollar
tone could mean some resistance with first barrier seen at the 0.94-figure.
EUR/USD – Bearish Risks. EUR/USD slipped past support at 1.3536
and remained soggy around 1.3530 awaiting inflation numbers at 1700 (HKT).
The EUR was sold against GBP and then AUD and CAD. Risks are to the downside
and the nearest bearish target for the EUR/USD pairing is seen at 1.3503. 18-SMA
is still below the 40-SMA on the 4-hourly chart and upticks could be limited.
Barrier is seen around 1.3554.
EUR/SGD – Pressured by the Cloud. EUR/SGD broke multiple supports on EUR
weakness and remains pressured to the downside. Cue of the day is the
inflation report from the Eurozone and a softer number could accelerate
offers towards the next support at 1.6762 ahead of the next at 1.6728. The
daily momentum chart shows increasing bearish momentum on the MACD and risks
are tilted to the south.
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Regional FX
The SGD NEER trades 0.69% above the implied mid-point
of 1.2503. We estimate the top end at 1.2255 and the floor at 1.2752.
USD/SGD – Static Again. USD/SGD is back hovering around the
1.2415-region this morning, currently sighted at 1.2419. Intraday MACD forest
still is now at the zero line, suggesting little directional cues ahead. Pair
should trade range-bound today within 1.2380/1.2450. Against market
expectations, NODX dipped by a larger 4.6% y/y in Jun from May’s -6.6%. Market
had been expecting a drop of just 2.7%. Electronics shipment fell by 17.4% in
Jun - more than the 12.1% expected - from May’s dip of 15.3%, while
pharmaceutical and petrochemicals exports rose 24.3% and 29% y/y in Jun.
AUD/SGD – Edging Lower. After breaking our 1.1620-support
temporarily yesterday, AUD/SGD is attempting another try today with the cross
currently hovering around 1.1615 with intraday momentum indicators showing
little directional clarity at the moment. A firm break of our 1.1620-support
should expose new support at 1.1590 today. 1.1724 continues to guard
topside today. SGD/MYR – Rangy. SGD/MYR is trading
near the middle of its current trading range of 2.5564-2.5571. Cross is seen
around 2.5622 currently underpinned by relative MYR strength. With intraday
MACD forest nearing to the zero line, we reckon the pair will remain in rangy
trades within 2.5564-2.5771 again.
USD/MYR – Rangy. USD/MYR was rejected by the 3.2020-barrier
and slid lower to around 3.1830 this morning. The pair has lost much of its
bullish momentum and settles within the 3.1660-3.2040 range with initial support
seen at first around 3.18, closed to the 18-SMA on the 4-hourly chart. The
1-month NDF was on the slide for much of Wed, weighed by positive sentiments at
home after the Nuzul Al-Quran break. Jun CPI came in within expectations at
3.3%y/y, having firmed from the previous 3.2%. Our economist’s measure of core
inflation which excludes key subsidised components of CPI was stable at 2.1%y/y
compared to 2.2% in May. Focus is on the fuel subsidy reform that could tweak
the inflation outlook but our CPI forecast is kept at 3.5% for now. Our
economic team also expects another 25bps hike before the year is finished.
USD/CNY was fixed higher at 6.1564 (+0.00429), vs.
previous 6.1435 (+2.0% upper band limit: 6.2820; -2.0% lower band limit:
6.0357). CNY/MYR was fixed at 0.5150 (-0.0027). USD/CNY –Choppy in Range. Spot edged lower this morning and was
last seen close to the 6.20-figure. Momentum is slightly bullish and
decelerating. Support is seen around 6.1950, which marks the lower bound
of the current range that spot is trading. Watch for a break on either side for
clearer direction indication. From the local press (Shanghai Securities News),
Director of policy Research at the Ministry of Housing and Urban-Rural
Development Qin Hong expects an improvement in the property market in 2H from
1H. Separately, Huatong Road & Bridge flagged that it may default on its
CNY400mn debt payment (BBG).
1-Year CNY NDFs – Buoyant. NDF bounced again this morning, inspired
by the higher fixing though bids are still resisted by the 6.2672-barrier.
There is not much momentum on either side though recent price patterns suggest
buoyancy above the 6.2560 support, marked by the 40-SMA on the 4-hourly chart. USD/CNH
– Downside Pressure. USD/CNH pulled back sharply again this morning,
drifting away from the NDF and was last seen around 6.2023, testing the support
thereabouts. A clearance here is needed for bears to gun for the next target at
6.1950. Momentum is bearish. CNH is still trading at a discount to onshore spot
but is fast catching up.
USD/IDR – Lower in Range. USD/IDR gapped lower at the opening to
11680 from yesterday’s close of 11698 as unofficial tallies from the Election
Commission showed Jokowi leading his rival Prabowo by a comfortable 52.8% to
47.2% with nearly 96% of the votes counted. Pair is currently sighted around
11660 with bullish momentum on the wane as indicated by intraday MACD. Still
concerns regarding the twin deficits are beginning to resurface and could weigh
on the IDR going forward. Still, foreigners are still voting with their money,
buying a net USD74.26mn in equities yesterday, likely positioning themselves
for a Jokowi victory. Ahead of the official results on 22 Jul, we expect the
pair to remain in their current trading range of 11500-12000. The 1-month NDF
is on the slight uptick this morning after easing to end yesterday at 11709
after hitting an intraday high of 11895. 1-month is last seen hovering around
11715 this morning with intraday MACD indicating bearish momentum currently.
The JISDOR was again fixed higher at 11805 yesterday vs. Tue’s 11709. BI
governor expects the current account deficit to come in higher in 2014 at
USD28bn vs. USD25bn previously due to higher oil imports. He expects the
deficit to be at the same level as last year’s at 3.33% of GDP. He also expects
the economy to grow by 5.1-5.3% in 2014 with inflation likely to reach 5.31%
because of higher power tariff rates and LNG prices. Meanwhile, FinMin expects
2Q GDP to rise by 5.3-5.5% because of election-related spending and low inflation.
USD/PHP – Downticks within Range. USD/PHP is trading slightly above the
middle of its current trading band of 32.185-32.855. Pair was last seen around
43.570 with risks still tilted to the upside. Offers remains around 43.855
today while 43.185 continues to provide support. The 1-month NDF inched lower
this morning, hovering around 43.580 this morning with intraday MACD still
showing little momentum in either direction.
USD/THB – 2-Way Trades. USD/THB is trading near the lower half
its current tight trading range of 32.050-32.310. Pair was last sighted around
32.110 with intraday MACD forest hugging close to the zero line currently.
Latest flows data showed that foreign funds continued their buying spree with a
net THB1.32bn and THB10.54bn in equities and debt purchased yesterday. Lacking
directional cues, pair is likely to remain in two-way trades today within the
current trading of 32.050/32.310 5.
Rates
Local government bond market saw some selling in the
morning session on the 7-yearr GII 3/21 on the back of efforts to cheapen an
Islamic PDS issuance today. Afternoon session was boosted by buying activities
on MGS which pulled yields across the curve lower by 1-2bps. Particular strong
buying was seen on the off-the run MGS 3/23 which dipped 4bps from last done.
June YoY CPI printed within market expectation at 3.3%.
The onshore IRS market was listless with no trades
reported, although the curve was quoted slightly higher. In fact, offshore
players were better receivers and MGS were seeing better buying, thus helped
capping the onshore IRS levels from going higher. 3M KLIBOR stayed unchanged at
3.58%.
The PDS market started off sluggish post-holiday, but
saw better buying in GG especially DanaInfra 21 which was taken down to 4.24%
from last traded of 4.32%. This was probably influenced by the new book opening
of MYR1.6 b DanaInfra as price guidance for the new 7-year piece (in yield) was
lower than the secondary level. Book was robust with an oversubscription of
MYR6b. Telekom 24 traded better by 2bps and closed at 4.68%. Market preference
was still towards longer-dated tenors.
Singapore
SGS started the day lower but eventually found support
and rebounded to close almost unchanged amidst thin trading conditions.
Meanwhile, the SGD rates market was equally quiet. The IRS curve flattened with
front-end rates up to 5 years marked higher by 1-2bps whilst the longer end
closed marginally lower, reflecting the overnight flattening of the USD curve
after Yellen's testimony to Senate.
Asian credit market continued with the selloff from
late yesterday. High yields from BB to B+ were down about 0.5 to 1 point with
rumours of some FM selling off during US trading hours. However, supports were
seen later from PB and FM picking up on the cheap. On new issuance, we saw CCB
5-year re-tap with final guidance at CT3 + 140bps (+/- 5bps) while the Republic
of Costa Rica is doing a 10-year Reg S deal.
Indonesia
Indonesia bond market slightly moved higher yesterday
as Jokowi secured 52.8% of the 125.6 mn votes counted as of yesterday according
to kawalpemilu.org, a website that tracks actual results at polling stations
that are uploaded to the KPU website. There is no other global or domestic
market sentiment that was driving the Indonesia bond market. Post market close,
Bank Indonesia announce their expectation of FY2014 inflation, GDP growth and
current account deficit. BI sees Indonesia inflation at 5.31% in 2014 partly
due to increases in power tariff rates and LPG prices, GDP growth at about 5.1%
- 5.3% with election related spending and low inflation supporting growth and
current account deficit at 3.33% of GDP due to high oil imports. 5-yr, 10-yr,
15-yr and 20-yr benchmark series yield stood at 7.856% (-0.1bps), 8.146%
(-1.8bps), 8.617% (-2.4bps) and 8.808% (-0.7bps) while 2-yr yield shifts down
to 7.422% (-2.8bps). Trading volume remains this as it was noted amounting
Rp6,922 bn yesterday. FR0071 (15-yr benchmark series) and FR0068 (20-yr
benchmark series) was the most tradable bond during the day. FR0071 total
trading volume amounted Rp1,246 bn with 66x transaction frequency and closed at
103.136 yielding 8.617% while FR0068 total trading volume amounted Rp1,100 bn
with 71x transaction frequency and closed at 95.968 yielding 8.808%.
On the corporate bond segment, trading volume remains
thin with total volume amounting Rp579 bn yesterday (vs average per day trading
volume of Rp750 bn). PPGD02ACN2 (Shelf registration II Pegadaian Phase II Year
2014; A serial bond; Rating: idAA+) was the top actively traded
corporate bond with total trading volume amounting Rp105 bn and was last traded
at 100.1 yielding 8.5464%.
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