FX
Global
Minutes of the July FOMC meeting were interpreted a
tad more hawkish than before and it gave the bullish cue that the greenback
needed to rise well above the 82-figure. There was acknowledgement that the
“likelihood of inflation running persistently below 2 percent has diminished
somewhat” and that labour market indicators show more improvement than
anticipated. The greenback pushed past the 82-barrier and hovered around the
82.25-level. UST 10-year yield edged higher above the 2.44% before
leveling off a touch below the mark. Equity indices closed with modest
gains.
Earlier on Wed, it was revealed that the Aug BOE
meeting had not one but two dissenters which gave the Minutes a hawkish tone.
GBP was up after the Minutes but further upmove was still hampered by soggy
EUR and dollar strength.
Nikkei took the positive cue, up +0.6% while Kospi
slipped -0.7% this morning ahead of the next key data- China’s Aug HSBC flash
PMI-mfg which turned out much lower than expected at 50.3. This sets a rather
cautious tone for Asian markets. This release also marks the start of all the
preliminary PMI-mfg releases out of Japan, Europe and then US tonight. Recent
output indicators out of China have underwhelmed, raising concerns that
recovery has not gone according to the plans of the government.
Dollar strength has denied the Asian bulls from
progressing and the overnight spikes in the greenback continue to keep
regional currencies on the backfoot. INR was the exception yesterday and PHP
will escape today as Onshore markets in the Philippines are closed for Ninoy
Aquino Day. The Jackson Hole Symposium starts today though the more keenly
watched speech by Fed Chair Janet Yellen happens tomorrow on 22 Aug. |
G7 Currencies
DXY – Bullish. The
DXY index got the bullish that it was waiting for, the Minutes of the FOMC.
From the minutes, there was acknowledgement that the “likelihood of
inflation running persistently below 2 percent has diminished somewhat” and
that labour market indicators show more improvement than anticipated. The
greenback pushed past the 82-barrier and hovered around the 82.25-level.
Momentum is bullish and next resistance is seen around 82.3456 ahead of the
82.6250. Support is now at 82-figure though we see dips to be likely shallow.
Next key data to watch is preliminary PMI-mfg numbers out of Europe and then
US. Look for additional cues of recovery in the US and divergence from the
Europe to add to the steam of the bulls.
USD/JPY – Overbought. USD/JPY bounced higher overnight underpinned by a stronger US dollar
tone. Pair is currently inching higher, sighted close to the 103-handle around
102.95. Intraday MACD is increasing bullish momentum, though RSI is indicating
overbought conditions. The grind higher today could be more gradual. Still, a
break of the 103-handle could see a bullish extension with immediate barrier
around 103.09 ahead of 103.43. Support is seen around 102.50. Today’s trade
data release showed exports rising by 3.9% y/y in Jul, beating estimates of
3.8%. With imports up 2.3%, this resulted in a trade deficit of JPY964bn vs.
expectations of JPY713.9bn but higher than Jun’s revised deficit of JPY823.2bn.
AUD/USD – Bearish. AUD/USD
firmed above the 0.93-figure at first on Wed before succumbing to USD strength
again. Bias is still to the downside and the 18-SMA continues to move
towards the 40-SMA and closing in on a negative cross-over. Pair is moving
towards the lower bound of the 0.9262-0.9330. The weaker-than-expected HSBC
PMI-mfg number triggered greater offers to the 0.9239-support before rebounding
to levels around 0.9250. Next support is seen around 0.92-figure.
EUR/USD – Bearish Risk. EUR has fallen below the 1.33-figure against the USD and waffled around
1.3250 at last sight. Conditions remain bearish for this pair ahead of
preliminary PMI numbers out later in European hours. Expect bounces to meet
barrier around 1.3320. A break of the 1.3235-support to expose the next at
1.3161.
EUR/SGD – Bears in Favour. The cross was caught in a tug-of-war between EUR and SGD weakness,
resulting in tight swivels around the 1.66-figure. We note that bearish
momentum had decelerated on the MACD though 18-SMA is still well below the
40-SMA. The 4-hourly chart also indicates a thicker bearish cloud ahead and
upsides are likely to remain capped by the 1.6640-barrier. Next support seen
around 1.6558. European preliminary PMI-mfg numbers later today provides
another window of opportunity for bears to gain steam. We still think bears are
in favour.
Regional FX
|
The SGD NEER trades 0.12% above the implied
mid-point of 1.2532. with the top end estimated at 1.2282 and the floor at
1.2782.
USD/SGD – Overstretched. USD/SGD upswing above the 1.25-figure continues this morning
underpinned by dollar upmoves overnight. Pair is hovering around 1.2518
currently after hitting a high of 1.2524 this morning. Momentum remains
lacking, though pair is in overbought territory. Risks are now tilted to the
upside given positive cross-over of the 18-DMA and the 40-DMA this morning.
Next event risk to watch out for is the Jackson Hole conference starting
tonight. With the pair now re-testing our barrier at 1.2521, a clean break
here exposes the stronger barrier at 1.2551. Offers today are likely to be
meet support around 1.2491, which is the top of the ichimoku cloud that lies
below price action.
AUD/SGD – Heavy. AUD/SGD failed to take out barrier at 1.1640 on its upswing
overnight, and has since bounced lower on the back of relative AUD weakness
to hover around 1.1602 at last sight. With losing all bullish momentum,
further slide below the 1.16-handle cannot be ruled out today. Downside
though continues to be limited by 1.1590 nearby before 1.1534, while topside
remains guarded by 1.1640. SGD/MYR – Waffling. SGD/MYR
is wobbling this morning, pulled in both directions by relative MYR weakness
and investor preference for the MYR. Cross is currently sighted around 2.5363
with intraday MACD forest hugging close to the zero line from above. Risks
though are still tilted to the downside given the 18-DMA lies below the
40-DMA. Look for support around 2.5282 still, while rebounds, if any, should
be mild, and is likely to meet barrier around 2.5430.
USD/MYR – Capped. This pair gapped higher this morning though bids to a high of 3.1772
met selling interest and pair is now back around the 3.1750-level. Retreat is
not unexpected given a looming rate hike in Sep despite the
softer-than-expected Jul CPI print released yesterday. Our economic
team noted that core inflation (excluding the key subsidised components of
CPI) steadied around 2.1%y/y and kept their full-year CPI forecast at 3.5%
but tweaked their 2015 forecast from 4.0% to 4.0-4.5%. They also have
upgraded real GDP growth to 6.0% from previous 5.4%. Our economic team also
hold their view that overnight policy rate will be raised to 3.50% in Sep.
Barrier for the USD/MYR at 3.1823 could slow more aggressive bids. Dips to
meet support around 3.1626. 1-month NDF rose overnight but likely to meet
some resistance as it nears a thick bearish cloud. Last seen around 3.1817,
expect topsides to be capped by the 3.19-figure.
USD/CNY was fixed higher at 6.1632 (+0.0052), vs. previous 6.1580 (+2.0%
upper band limit: 6.2890; -2.0% lower band limit: 6.0424). CNY/MYR was fixed
at 0.5159 (+0.0018). USD/CNY – Rangy. Pair rose again this
morning, underpinned by the dollar strength and higher fixing and last seen
around 6.1464. There is a lack of momentum with interests on both sides.
Upticks are still likely to be deterred by the 3.1570-barier while any
retreats should meet first support at recent low of 3.1348. China Securities
Journal reported that most SOEs could be changed to a hybrid of
private-public ownership. Aug HSBC flash PMI-mfg came in 50.3, much softer
than the expected 51.5.
1-Year CNY NDFs – Choppy. The NDF extended its upmove this morning after a gentler rise
overnight and was last seen around the 6.23-figure. The higher fixing and
weaker HSBC flash PMI-mfg for Aug seemed to have spurred bids though we are
wary of barrier around 6.2350. Support is seen around 6.2220. USD/CNH – Limited
upticks. USD/CNH edged higher this morning, still deterred by the
40-SMA around 6.1482. Last seen around 6.1475, momentum on the intra-day
chart is bullish but upticks seem very gradual and likely lacking steam to
break above the cloud around 6.1535. Support is now seen around 6.1432 ahead
of recent low at 6.1355. CNH trades at a discount to CNY at the moment.
USD/IDR – Still Rangy. USD/IDR is edging higher this morning following the stronger dollar
tone overnight. Momentum has now flipped and is showing mild bullishness,
though the pair seems close to overbought territory. Pair is currently
sighted around 11704, closing in on our resistance at 117500. Should foreign
funds continue to sell-off Indonesia assets like they did yesterday, selling
a net USD38.43mn in equities, this could support the USD/IDR higher today.
Though the pair has peaked out of the top of the intraday ichimoku cloud this
morning, it remains surrounded by the cloud, suggesting that range-bound
trading remains likely ahead. Trading range remains within 11600-11750 today,
and any breakout from current ranges will probably have to wait until the
Constitutional Court ruling on Fri. The 1-month NDF edged higher this morning
towards the upper bound of its current 11708-11789 trading range, sighted
around 11776 with the four-hourly MACD continuing to show mild bullish
momentum. The JISDOR was fixed marginally higher on Tue at 11682 compared to
Mon’s 11681.
USD/PHP – Closed For
Holiday. Onshore markets are closed today for Nonoy Aquino Day and will
re-open tomorrow. With onshore markets closed, focus will be on the
1-month NDF. I-month is inching higher this morning towards the 44-handle,
hovering around 43.950 currently. Intraday MACD is showing mild bullish
momentum, though RSI is closing in on overbought conditions. A break of the
44-handle today could expose the next barrier around 44.150.
USD/THB – Mildly Bullish. USD/THB is on the climb this morning, aided by the dollar uptick
overnight. Pair is trading around 31.920 currently with intraday momentum
indicators including MACD now increasingly mildly bullish, though the pair
seems overstretched. Meanwhile, improved risk appetite yesterday saw foreign
funds buying a net THB0.87bn in equities and a net THB0.46bn in debt, and
continued improvement in risk sentiments could see further interest in Thai
assets today, providing support for the THB. This could put a drag on the
climb in the pair today. Hurdle to cross today remains 32.050, while
offers should still meet support around 31.740 today. |
Rates
In the local government bond market, selling was seen
on the front ends with 3y and 5y benchmark 3/17 and 10/19 higher by 2-3bps from
yesterday. The 10y benchmark 7/24 dipped 2bps as we suspect locals protecting
positions held. We continued to see better sellers on any price uptick. The
curve is experiencing a bear flattening. We think yields to inch higher as we
approach the next MPC meeting in September.
The IRS curve was seemingly
unresponsive to higher regional rates and higher bond yields. We suspect this
is probably due to market is already positioned paid rates. No trades were
reported. 3M KLIBOR added another 1bp to 3.64%.
Activity returned on the secondary market but remained
subdued with some trades done on GGs (Dana and Prasa) and high grade AAA papers.
Aman 5/21 was quoted at 4.35/30 and taken at 4.30. Manjung AAA papers with
maturity ranging from 4-7 years were quite actively traded today.
Interestingly, PTPTN 3/21 was quoted at 4.22/19 which was at a similar level to
the newly issued PTPTN 7 year at 4.19%.
Singapore
The SGD rates market was very quiet with nothing much
traded. Post BoE minutes we saw TYs hit the low of 126-02 before recovering to
126-07/08. Markets await FOMC minutes to set the tone for the Jackson Hole in
cautious tone ahead of the events.
In the Asian credit market, real money demand started
to slow after the recent rally in the IG space. In the Chinese properties HY
sector, interest was mixed with some selling activities to take profit, with
bond prices traded slightly weaker during the day.
Indonesia
Indonesia bond market booked losses on yesterday’s
trading session as bond player might stay cautious ahead of constitutional
court decision on Prabowo challenge in regards to the presidential race result.
There weren’t other market sentiment which drove LCY bond market lower. Beside
constitutional court result on recent presidential race, bond player are also
waiting FOMC minutes release which could indicates Fed further reference rate
guidance. If the release shows a sign of Fed being hawkish than we might be
experiencing bond price moving lower and vice versa. Some relative small buying
interest were seen on FR0070 and FR0068 from foreign and local banks while
small local financial institution names were seen on the selling side as they
were taking profits post bond auction on Tuesday. 5-yr, 10-yr, 15-yr and 20-yr
benchmark series yield stood at 8.034% (+1.1bps), 8.334% (+3.7bps), 8.725%
(+3.2bps) and 9.015% (+3.3bps) while 2-yr yield shifts up to 7.640% (+2.1bps).
Trading volume remains heavy amounting Rp13,439 bn from Rp11,532 tn with FR0070
(10-yr benchmark series) and FR0068 (20-yr benchmark series) as the most
tradable bond. FR0070 total trading volume amounted Rp4,514 bn with 156x
transaction frequency and closed at 100.257 yielding 8.334% while FR0068 total
trading volume amounted Rp3,864 bn with 188x transaction frequency and closed
at 94.151 yielding 9.015%.
SBR001 coupon rate increased to 9.00% from 8.75% as
LPS rate increased to 7.75% from 7.50%. SBR001 coupon rate is set to be
adjusted every three months. Next SBR001 coupon rate adjustment will occur
before December 2014.
Corporate bond trading volume was seen rather thin
yesterday amounting Rp242 bn (vs average per day (Jan – Jul) trading volume of
Rp684 bn). TUFI01ACN2 (Shelf registration I Mandiri Tunas Finance Phase II Year
2014; A serial bond; Rating: idAA)) was the top actively traded corporate bond
with total trading volume amounting Rp75 bn yielding 10.721%.
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