FX
Global
Dollar sprung into life on EUR slippage after Eurozone services and
composite PMI added to the soft outlook of the Euro area. Retail sales also
missed expectations at 0.4%m/m for Jun. In contrast, overnight US ISM-non mfg
composite beat expectations at 58.7 and gave the greenback a further boost. DXY
was seen around 81.53 in early Asian trade. Equities, on the other hand, fell
with DJI down -0.8%, S&P at -1.0% and NASDAQ at -0.7%. US treasuries were
bid towards the end of NY session amid threats of invasion by Russia.
UK industrial production and manufacturing production for Jun are due
later today though the unimpressive UK PMI-mfg for Jul last Fri probably would
keep players cautious. GBP is still heavy against the dollar with bids still
deterred by the 1.6890-barrier. US trade balance is on the tap today.
In Asia, BOT decides on monetary policy rate after Malaysia releases its
trade numbers at noon. Markets were pricing in a rather decent print before the
overnight dollar bounce lifted the USD/MYR pairing above the 3.20-figure. BOT
is not expected to move today and USD/THB still hovers within recent range.
Elsewhere, Indonesian ex-general Prabowo Subianto will start an election court
challenge today. Expect dollar firmness and global risk aversion to temper the
strength of most other AXJs.
G7 Currencies
DXY – Upside Risks. The greenback gained bullish momentum
overnight and into Asia, last seen around 81.53. Its upmove was spurred
by EUR weakness amid poorer Eurozone PMI services and composite prints. The
upcoming ECB meeting also likely dragged the currency under the 1.34-figure. On
the 4-hourly chart, the 40-SMA is still a support for the greenback and topsides
may be deterred by the 81.72-barrier. Risks are tilted to the upside. US
trade balance is due tonight.
USD/JPY – Supported. USD/JPY attempted to break out of its current trading range, hitting a
high of 102.93, before being dragged lower by US equities. Pair is currently
hovering lower around 102.56 with intraday MACD showing waning mild bearish
momentum. However, a thin intraday ichimoku cloud lies below price action that
could provide support for the pair today. Support for the pair remains around 102.20,
while immediate hurdle is around 102.73 ahead of 103.09 ahead of 103.43.
AUD/USD – Downside Scope. The RBA steady rate decision did nothing
for the AUD and a relatively unchanged statement also lacked inspiration for
the pair. Investors preferred to err on the side of caution and AUD
succumbed to the dollar strength that followed. The pair was last seen around
0.93-figure. Pair has lost all bullish momentum at this point and awaits the
next release – labour report, tomorrow. Expect more scope for downsides towards
support around 0.9274. Bids to remain deterred by 0.9330.
EUR/USD – Pressured by the cloud. EUR/USD slipped towards the support area of 1.3367
and steadied thereabouts for the rest of the night into Asia this
morning. A clean break of this level is required to expose the next at
1.3316 and conditions are bearish. Expect upticks to be capped by the ichimoku
cloud around 1.3406. Moves today may be limited but nonetheless heavy ahead of
ECB meeting tomorrow.
EUR/SGD – Bearish Risks. EUR/SGD remained within the intra-day ichimoku cloud
and was last seen around 1.6690 this morning. MACD forest on the 4-hourly chart
is still under the zero-line. Intra-day action could be still confined within
the 1.6680-1.6730 for now though current momentum is such that risks are tilted
to the downside. A break of the lower bound could trigger aggressive offers
towards the next support around 1.6640.
Regional FX
The SGD NEER trades 0.45% above the implied mid-point of 1.2542. The top
end is estimated at 1.2293 and the floor at 1.2792.
USD/SGD – Two-Way Trades With Upside Bias. USD/SGD continues to edge higher on the back of a
resurgent dollar. Pair was last sighted around 1.2487 with momentum indicators
including intraday MACD showing little direction clarity currently. We reckon
that further two-way trades are likely though the risks are to the upside given
that the 18-DMA lies above the 40-DMA, though the gap could be narrowing. Key
support remains around 1.2450 with 1.2502 still guarding topside.
AUD/SGD – Lacking Momentum. AUD/SGD is back on the downtick this morning,
hovering around 1.1605 currently on the back of the relative weakness of the
AUD. Intraday MACD forest is now hugging the zero line, suggesting trades in
either direction are likely. A thick intraday ichimoku cloud is form above
which could determine price action ahead. For now, cross is likely to remain in
rangy trades within 1.1590/1.1640. SGD/MYR – Upside Bias.
SGD/MYR is edging slightly higher this morning after yesterday’s slide on the
back of relative MYR weakness. Cross is currently sighted around 2.5625 with
intraday MACD showing little momentum in either direction. However, the
negative cross-over of the 18-DMA and the 40-DMA suggest further upsides are
likely. Offers continue to be hindered by 2.5730 while bids remained limited by
2.5547.
USD/MYR – Choppy. USD/MYR slipped to a low of 3.1848 and closed at 3.1875 on Tue, weighed
by buy flows orders seen throughout the day as noted by our traders. This
morning the pair gapped up on dollar strength and was back above the
3.20-figure. MACD shows little momentum and we suspect prices could be choppy
with interests on both sides. Support is seen around 3.1870 while bids could be
slowed by the 3.2095-resistance. 1-month NDF was also on the uptick and was
last seen around 3.2074. Risks are tilted to the upside for both NDF and spot
prices. Jun trade numbers are due today and majority expects a rather steady
pace of expansion for both exports (Cons: 15.0%y/y) and imports (Cons.:
12.9%y/y). Trade balance is likely to widen a tad to MYR5.97bn from previous
MYR5.72bn.
USD/CNY
was fixed at 6.1681 (+0.0026), vs. previous 6.1655 (+2.0% upper band limit:
6.2940; -2.0% lower band limit: 6.0472). CNY/MYR was fixed at 0.5181 (-0.0001).
USD/CNY – Limited Downside. Pair is trading lower this morning around 6.1706 in tandem with the
majority of USD/AXJs, edging close to our support at 6.1699. A firm break of
this support should expose the next support at 6.1533 (50% Fibonacci
retracement of the Jan-Apr rally), which lies some distance away. The 18-DMA
remains well below the 40-DMA and bids should continue to be limited by the
6.1860-resistance. At home, China PBOC begins inspection on interbank business
(21st Herald). Zhejiang and Guangdong provinces will announce
state-owned company reform plans soon (Securities Daily).
1-Year CNY NDFs –Consolidation. The NDF was trapped in the intra-day ichimoku cloud,
last seen around 6.2465 this morning. MACD forest on the 4-hourly chart shows
bearish momentum though 18-SMA is still above the 40-SMA. Expect consolidative
trades with 6.2625 seen as a viable barrier for the pair, though an interim one
is seen at 6.2520. Pair tests could drift lower towards the next support around
6.2430. A break out on either side widens range-trading to 6.2370-6.2575. RSI
shows near oversold conditions. USD/CNH – Heavy. USD/CNH was
little moved on Mon, still traded around 6.1740, within striking distance of
the 6.1706-support. A break here could trigger aggressive offers towards the
next at 6.1591. MACD shows little momentum and 18-SMA shifts closer towards the
40-SMA, indicating likely more sideway trades. Barrier remains around 6.1850
for intra-day trade, ahead of 6.1900. CNH trades at a slight premium to CNY.
USD/IDR – Upside Bias. USD/IDR continues to trade in the thick of the
intraday ichimoku cloud, hovering around 11763 currently. Intraday MACD is now
showing waning bullish momentum, though risks are bias to the upside given the
recent negative cross-over of the 18-DMA and the 40-DMA. With the pair trapped
inside the intraday ichimoku cloud, range-bound is likely ahead.
Immediate barrier remains is around 11835 ahead of 11950, while nearby support
is around 11650 before 11500. Upside pressure could also come should foreign
funds continue to sell-off of Indonesia assets, like they did yesterday with a
net USD11.11mn of equities sold. The 1-month NDF is back on the uptick this
morning, hovering around 11836 from yesterday’s close of 11805 with intraday
ACD is waning bearish momentum. The JISDOR was fixed lower yesterday at 11733
from Mon’s 11747. Real GDP growth disappointed in 2Q coming in at just 5.12%
y/y vs. consensus’ 5.20% and lower than 1Q’s upwardly revised 5.22%. Private
consumption held up well at 5.59% y/y on the back of pre-election spending but
government spending (-0.71% y/y) slipped and investment moderated (4.53% y/y)
on the back of political uncertainty.
USD/PHP –
Supported Higher. USD/PHP is back on the uptick, aided by dollar
strength overnight. Pair is currently sighted around 43.730 with bullish
momentum dissipating as indicated by intraday MACD, though any downside could
be limited by the thin intraday ichimoku cloud lying below. Risks remains to
the upside as the 18-DMA lies above the 40-DMA. Immediate barrier is around
43.750 with a firm break likely expose the next hurdle at 44.000. Bids remain
limited by 43.528 today. 1-month NDF is inching higher this morning, hovering
around 43.750 currently with intraday MACD showing dissipating bearish
momentum.
USD/THB – Rangy. USD/THB remains in a tight trading range within 32.050-32.310 in the
past few sessions, but is currently sighted lower around 32.210. Intraday MACD
forest though is hugging close to the zero line, suggesting little directional
cues. BoT meeting today is unlikely to throw up any surprises and have a
limited impact on the pair. The sell-off in debt has now hit equities with
foreign funds selling a net USD842.78mn of equities yesterday as well as a net
THB4.89bn in debt, pressuring the pair higher. Continued sell-off today could
limit downside for the pair. We look for the pair to trade range-bound within
32.050/32.310 today. BoT meets today to decide on monetary policy and market
and our economic team are expecting the central bank to hold steady on its
policy rate at 2.0% given that the junta’s fiscal policy should backstop growth
ahead.
Rates
In the local government bond market, most trades centred on the 3y and
10y benchmark MGS 3/17 and 7/24 with the 3/17 closing the day unchanged while
the 7/24 inched 1bp lower from yesterday’s close. The 10y GII 5/24 saw active
trading with buy orders throughout the day. Long end bonds remained well bid
although nothing was done for the day.
The IRS curve faces resistance climbing above its recent highs of 5y at
4.07/4.06% as MGS yields remained depressed, while any downside in rates is
capped by elevated 3M KLIBOR. No trades were reported today.3M KLIBOR stayed
unchanged at 3.60%.
In the PDS market, high grades were in focus. Decent amount traded for
names like Danainfra, Pengurusan Air SPV, and Prasarana. AAA names like Plus
and Rantau were also in demand. Meanwhile, a GG paper is in the pipeline.
Singapore
SGS prices opened about 1bp stronger today with buying interest pushing
prices to 3bp higher towards lunchtime. IRS opened lower with the 10y hitting
2.50% at the low before recovering to 2.52% at the end of the day. At market
close, SGS ended flat in line with IRS levels.
In the Asian credit market, books opened for a couple of names, among
which include Export Import Bank of Korea (KEXIM) which is issuing 5y and 12y
USD papers. KEXIM is rated Aa3 by Moody's and A+ by S&P. The issuances were
guided at T+90bps for its 5 years and T+100bps for its 12 years. As KEXIM is
100% government owned, we believe that there is some value at current level
compared given the usual support of Korean names from their onshore investors.
Indon and Philippines name traded better today but skewed towards the short
end. Private banking seems to be the one that is supporting the market. We
still see some demand for Chinese names especially on IG names, while Malaysian
names saw some selling.
Indonesia
Indonesia’s 2Q 14 GDP booked a slower growth of 5.12% YoY compared to 1Q
14 GDP of 5.22% YoY. Despite solid growth, household consumption slowed.
Government consumption also decelerated due to postponement of 13th
salary disbursements until Q3 2014 along with decreased spending by government
ministries and institutions. Furthermore, investment growth also slowed,
especially transportation and communication investment as a result of squeezing
business margin from the sector. Overall, external sector performance remained
weak, undermined by exports of coal and minerals. Food, beverages and tobacco
improved as the result of election and Ramadan festival preparation. Overall, we expect the Indonesian economy is only
growing at about 5.40% in 2014, slowing from 5.78% in 2013.
5-yr, 10-yr, 15-yr and 20-yr benchmark series yield stood at 7.949%
(+1.3bps), 8.169% (+4.8bps), 8.556% (+0.7bps) and 8.792% (+4.9bps) while 2-yr
yield shifts up to 7.474% (+3.7bps). Trading volume was noted heavy due to the
auction yesterday amounting Rp12,169 with FR0068 (20-yr benchmark series) and
FR0070 (10-yr benchmark series) was the most tradable bond during the day.
FR0068 total trading volume amounted Rp4,979 bn with 94x transaction frequency
and closed at 96.124 yielding 8.792% while FR0070 total trading volume amounted
Rp1,467 bn with 50x transaction frequency and closed at 101.341 yielding
8.169%.
Indonesian government held a series of auctions yesterday and received a
total of Rp17.94 tn bids versus its target issuance of Rp10.00 tn or
oversubscribed by 1.79x. However, only Rp11.60 tn bids were accepted for its
3-mo SPN which was sold at a weighted average yield of 5.79700%, 1-yr SPN at
6.95700%, 5-yr FR0069 at 7.94880%, 10-yr FR0070 at 8.18702% while 20-yr FR0068
was sold at 8.78992%. Incoming bid during the auction came in lower by 9.01%
compared to Jul 22nd, 2014 conventional auction amounting Rp19.72 tn
and were mostly clustered at the FR0068 (20-yr benchmark series) and FR0070
(10-yr benchmark series). Bid-to-cover ratio came in at 1.12X – 3.70X. No bids
were rejected during the conventional auction. We see that bond auction was
relatively plausible. Till the date of this report, Indonesian government has
raised approx. Rp41.51 tn worth of debt through bond auction in 3Q 14 which
represents 43.23% of the 3Q 2014 year target of Rp96 tn.
On the corporate bond segment, trading volume remains thin amounting
Rp79 bn (vs average per day (Jan – Jun) trading volume of Rp677 bn). TAXI01
(Express Transindo Utama I Year 2014 Rating: idA) was the top
actively traded corporate bond with total trading volume amounting Rp23 bn.
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