FX
Global
European markets rallied with focus on ECB Draghi’s
comments at Jackson Hole. His press release was even amended to reflect what
had been said. Positive sentiments extended into New York despite weaker data
releases. German IFO prints eased more than expected in Aug with current
assessment at 111.1 vs. previous 112.9 and expectations at 101.7 vs. previous
103.4. US new home sales also fell -2.4%m/m to 412K in Jul from the previous
422K. Dollar still kept a bid tone while S&P500 crossed the psychological
2000-mark overnight though closed just a touch below the level. DJI and
NASDAQ were up +0.4% each. USTs did not have a bad session as well, with
10-year still around 2.38%.
The NZD was under renewed pressure this morning
after the release of lackluster trade numbers. Trade balance slipped into a
wider-than-expected deficit in Jul of –NZD692mn. There are few data releases
that Asian players can count on for trading cues today with only Singapore’s
industrial production and Philippine’s trade numbers scheduled for release.
Beyond Asia, there is US durable goods order and consumer confidence which
produce more action in the NY session. Globally, investors eye development in
Eastern Europe where Ukraine President Poroshenko dissolved parliament. |
Insofar, KRW stuck out amongst its regional peers with
an appreciation of +0.2% against the USD, underpinned by exporter’s demand.
SGD, MYR and THB have weakened a tad in early trades in against the greenback.
Expect a lack of cues to keep most USD/AXJs buoyant in range.
G7 Currencies
DXY – Buoyant. The
DXY index traded in narrow range on Mon and is back to test the 82.625-barrier that
we eye. Conditions are still a tad overbought and could slow further bids. That
said, we should not underestimate the bullish steam of the greenback and a
break of the 82.625-resistance exposes the pair to the 82.94-barrier, close to
the 83-figure. Retreats to meet support around 82.35. Jul durable goods orders
will be watched ahead of Aug consumer confidence. Both are indicators of
private consumption at home.
USD/JPY – Still Buoyant. USD/JPY stayed above the 104-figure as the dollar
continues to underpin, but the uptick so far has been mild. Pair has remained
range-bound within 103.43-104.36, hovering currently around 104.11. Intraday
MACD is showing increasing mild bearishness though risks are still to the
upside with the 18-DMA still above the 40-DMA. With the 104-handle taken out,
next barrier is around 104.36 ahead of the next at 104.61. Support is seen
around 103.43 before the 103-figure.
AUD/USD – Pressure to the Downside. AUD/USD slipped under the
0.93-figure overnight, weighed by dollar strength and apprehension of the 2Q
CAPEX numbers due Thu. A low of 0.9272 was seen this morning with next support
seen around 0.9262 and 0.9239. Pullback is unlikely to gain much momentum
within this session given the lack of cues. Expect further dips to be shallow
and watch the US durable goods order and consumer confidence data for dollar
swings that could add bearish momentum to the AUD/USD pairing ahead of 2Q CAPEX
on Thu.
EUR/USD – Heavy. EUR did not get much help from the IFO numbers and
Draghi’s comments kept the pair heavy around 1.3190 this morning. Bearish
pressure waned for this pair but recent price action suggests little buying
interests at this point. Next cue comes from the US data. Support is seen
around 1.3160 while bounces could meet resistance around 1.3235.
EUR/SGD – Shallow Dips. The cross was weighed by the soggy EUR, last seen around the
1.65-figure. Bearish momentum decelerates for this pair and support is seen
around 1.6468. Dips are likely to remain shallow with RSI at 36.20. Watch US Aug
consumer confidence and Jul durable goods order for dollar moves that could
swing this cross. Any interim retracements to meet barrier at 1.6558.
Regional FX
The SGD NEER trades 0.14% above the implied mid-point
of 1.2520. The top end is estimated at 1.2270 and the floor at 1.2770.
USD/SGD – Sideways.
USD/SGD continues to trade above the 1.25-figure as dollar continued to be
buoyant. Pair is currently hovering around 1.2510 with momentum in either
direction lacking. Still, risks are to the upside given that the 18-DMA lies
above the 40-DMA. IP data is due later today but we do not expect this to
move the pair significantly barring surprises. With directional cues lacking,
pair is likely to trade sideways today within 1.2472-1.2521 though upside risks
remains. Headline inflation rose by just 1.2% y/y in Jul (Jun: 1.8%) vs.
estimates of 1.8%. The better-than-expected inflation print was helped by lower
cost of private road transport cost and a slower rise in food prices. However,
core inflation rose 2.2% y/y in Jul due to a pickup in services inflation,
which rose 2.5% y/y. For the full-year, MAS and the government are keeping
their headline and core inflation forecast unchanged at 1.5-2.0% and 2-3%
respectively. As for IPI, market expects a pick-up in factory output 3.3% y/y
in Jul from Jun’s 0.4%.
AUD/SGD – Mild
Correction. AUD/SGD is sliding lower this morning on the back of
the relative weakness of the AUD and is sighted hovering around 1.1608
currently. Attempts to break above 1.1640 yesterday were unsuccessful and
1.1640 remains the hurdle to overcome. Support nearby is seen around 1.1590
before 1.1558 (12 Aug low). SGD/MYR –Soggy. SGD/MYR is attempting
to break below its current tight range of 2.5280-2.5400 with the cross around
2.5275 at last sight. Intraday MACD forest is hugging close to the zero line,
though risks are still to the downside the 18-DMA still lies below the 40-DMA.
However, RSI is still indicating oversold conditions. A firm break of 2.5280
should expose the next support at 2.5176.
USD/MYR – Downward Tilt. USD/MYR edged lower this morning after an initial upmove at
open. Session on Mon was quiet in the onshore FX market though local bond
market was more active. Trades were concentrated on the 10y MGS while 10yr GII
is seen luring interest from real money onshore accounts, according to our
traders. Expect USD/MYR to remain tilted to the downside with support
seen at 3.1610. Topsides are guarded by the 3.1823-barrier. 1-month NDF also
traded lower at 3.1670 but still, there are little directional cues offered by
the momentum indicators. Prices moves are guided by the lower bound of the
intra-day ichimoku cloud and prices may remain choppy within 3.1600-3.1750.
USD/CNY was fixed higher at 6.1663 (+0.0010), vs. previous 6.1653 (+2.0%
upper band limit: 6.2921; -2.0% lower band limit: 6.0454). CNY/MYR was fixed at
0.5137 (-0.0009). USD/CNY – Upside Tilt. Pair is still stuck
around 6.1540, uninspired by a marginally higher fixing. Momentum is still
bullish for the pair on the 4-hourly chart and next barrier is now seen at 6.1700
this week. Risks are to the upside and any unexpected retreats could meet
support around 6.1495. ahead of the next around 6.1400. PBOC inked an agreement
with the Central Bank of Sri Lanka to allow investment in the Chinese interbank
bond market. In other news, the establishment of the deposit insurance scheme
could be postponed to next year instead of 2014. Elsewhere, Guangdong province
requests for a report on SOE reform from local governments and companies by end
Sep, according to Shanghai Securities.
1-Year CNY NDFs – Two-Way Risk. The NDF swivelled around 6.2380 for much of Mon, losing bullish
momentum. 6.2429 still caps upticks this week and we are still a bit wary of a
resurgence of dollar strength. Momentum is lacking on either side at this point
and we see two-way risks this week. Next barrier is eyed at 6.2485. Support is
seen around 6.2340. USD/CNH – Rangy. USD/CNH slipped to levels
around 6.1530 this morning and momentum has turned bearish for this pair.
Still, the pair is above the intra-day ichimoku cloud. A break of support at
6.1505 could trigger more offers towards the next support around 6.1426.
Barrier is still seen around 6.1525. CNH trades at a discount to CNY now.
USD/IDR – Upside Risks. USD/IDR is on the uptick on the back of a resurgent dollar overnight,
still hovering above the 11700-handle at around 11723. Momentum remains bullish
as indicated by intraday MACD. Also likely to keep the pair elevated ahead is
market’s concerns about the president-elect’s cabinet choices, his ability to
build a parliamentary majority and most importantly, his determination to deal
with the problems facing the economy, particularly fuel price subsidies. As
well, diminishing risk appetite like yesterday, which saw foreign funds selling
a net USD15.12mn in equities yesterday, could keep the pair elevated today.
With risks still tilted to the upside (18-DMA lies above the 40-DMA still), we
expect the pair to trade close to the upper-end of its current trading range of
11600-11750. The 1-month NDF is wobbling this morning, currently hovering
higher around 11769 with MACD still showing bullish momentum, albeit waning.
The 1-month is now in the thick of an intraday ichimuko cloud and is likely to
hover range-bound within the cloud today. The JISDOR was fixed higher at 11714
on Mon, up from Fri’s 11654.
USD/PHP – Range-bound. USD/PHP
is on the downtick as markets onshore re-opened after yesterday’s public
holiday. Pair is currently sighted around 43.808 with little momentum ahead as
indicated by intraday MACD. Risks for the pairing remains to the downside as
the 18-DMA remains below the 40-DMA. Still, we expect the pair to remain in
rangy trades within 43.750-43.930 as it is currently trapped in a thin intraday
ichimoku cloud. A break out of the cloud in either direction could see the
trading range widen to 44.528-44.000 ahead. The 1-month NDF is on the downtick,
even as it remains trapped within an intraday ichimoku cloud at the moment,
hovering around 43.800 with intraday MACD forest hugging close to the zero line
from below. 1-month is likely to trade range-bound today. Imports fell by 3.6%
y/y in Jun, coming in worse-than-market’s 3.4% expectations. This resulted in a
wider trade surplus of USD0.73bn in Jun compared to May’s USD0.42bn.
USD/THB – Upticks Within Range. USD/THB remained contained below our barrier at 32.050 so far. Sighted
edging higher this morning on the back of mild dollar strength to around
31.982, intraday MACD forest is hugging closer to the zero line, suggesting
little directional cues ahead. Foreign appetite for Thai assets were mixed with
a net THB0.28mn in equities sold but a net THb0.12mn in debt bought, which
provided little support for the THB. Continued waning appetite for Thai assets
is likely to support the pair higher ahead. With the pair still trapped in the
intraday ichimuko cloud, range-bound trading is likely ahead within
31.865-32.050. We need to see a firm break in either direction for the pair to
trade a wider 31.740-32.245. Customs trade data are eyed today and upside surprises
could keep the THB supported. Market expects exports to rise by 4.0% y/y and
imports to contract by 8.9% y/y in Jul from 3.9% and -14.03% respectively.
Trade balance is expected to narrow to USD500mn in Jul from Jun’s USD1.79bn.
Rates
Local government bonds started the week with most
trades centered upon the 10y. We still saw better sellers on the 10y benchmark
MGS 7/24 and the Islamic 10y GII 5/24 with both ended 2bps higher. Market will
see a retap on the 10y GII 5/24 with an expected size of MYR3-3.5b while the
current outstanding is MYR6.5b. We expect the bond to be supported by onshore
real money accounts.
In the IRS market, 2y IRS traded lower at 3.82%,
contrasting the 3M KLIBOR movement which added another 1bp to 3.67%. Basis was
quoted slightly tighter and we think tight basis could stay for a while as
market still flushed with liquidity.
The PDS market was pretty listless any clear
direction. Volume traded relatively thin with the same names being sighted.
Levels were pretty much rangebound. WI Rantau edged up a tad after being given
at 4.12%.
Singapore
The SGS curve got flatter with higher short end yields
but long SGS rallied by about 1-4bps. Investors sell the short end on renewed
signs of the US Fed might raise interest rate soon taking cue from Yellen’s
message from Jackson Hole over the weekend, while yields on long bonds declined
likely driven by expectation of inflations to stay reasonably low.
The Asian credit market saw light flows and listless
trading with UK on holiday and the US not yet open during Asian trading hours.
There was some interest in short-dated papers. No new books opening today.
Indonesia
Overall LCY bond market closed higher yesterday amid
Rupiah depreciating. There aren’t any justifications for bond price hike
yesterday. This week there won’t be any economy data publication yet we see
bond market would be recording gain amid moving within a tight range on the
expectation of lower August inflation and a surplus July trade balance. Our
economist sees that August inflation would continue creeping down to 3.80% -
4.00% yoy as last year subsidize fuel price hike impact towards inflation would
totally fade and as the impact of volatile food price hike vanishes post
Ramadan and Eid al Fitr festive. July trade balance is expected to come in
surplus between US$50 mn to US$100 mn as imports growth may be significantly
lower compared to exports growth with a consideration of Eid al Fitri preparation
have completed before the festival and Eid al Fitri holiday may have inhibit
port activity. 5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at
8.023% (+1.1bps), 8.273% (+0.4bps), 8.649% (-2.5bps) and 8.897% (-4.5bps) while
2-yr yield shifts down to 7.652% (-0.4bps). Trading volume was noted amounting
Rp6,813 bn from Rp8,525 tn with FR0068 (20-yr benchmark series) and FR0070
(10-yr benchmark series) remaining as the most tradable bond. FR0068 total
trading volume amounted Rp2,654 bn with 66x transaction frequency and closed at
95.197 yielding 8.897% while FR0070 total trading volume amounted Rp1,292 bn
with 25x transaction frequency and closed at 100.657 yielding 8.273%.
DMO will conduct another weekly auction today with
three series to be auctioned are SPN-S13022015 (Coupon: discounted; Maturity:
13 Feb 2015), PBS005 (Coupon: 6.750%; Maturity: 15 Apr 2043) and PBS006
(Coupon: 8.250%; Maturity: 15 Sep 2020). We do believe that the auction will be
oversubscribe by 1.7x – 2.2x from its indicative target issuance while our view
on the indicative yield are as follows SPN-S13022015 (range: 5.900% – 6.100%),
PBS005 (range: 9.140% – 9.340%) and PBS006 (range: 8.090% – 8.200%).
Corporate bond traded heavy amounting Rp925 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 Rp124 bn yielding 10.687%.
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