FX
Global
Overnight session was dull with a flat performance by equities,
following a negative European session. Nonetheless, DXY retained buoyancy
above the 84-figure and all eyes are on US data tonight – retail sales and
consumer confidence. Elsewhere, UST 10-yr yields edged higher after an
initial dip in late Asian session, awaiting better data cues.
USD/JPY arrives at the 107-mark by early Asia and BOJ Kuroda delivers
his speech in Tokyo after lunch today. Expect little other cues in Asia
within the session as the data calendar lightens. Even reactions to the US
data tonight might be tempered by apprehension ahead of FOMC meeting next week.
The Scottish Referendum also looms, threatening risk appetite. IMF warned
that a “Yes” vote could mean much uncertainty. GBP has been off its lows,
underpinned by new polls that shows that the “No” side leads.
Asia was a mixed bag on Thu with only PHP, MYR and INR stronger
against the USD. The rest clocked mild losses. This morning, BOK left key
interest rate unchanged at 2.25%. In the absence of fresh cues, focus could
be on possibly more fresh sanctions on Russia, imposed by the European Union.
Elsewhere, US President Obama reiterates its air campaign against Islamic
State jihadists. Expect intra-day trades could carry an undertone of caution. |
G7 Currencies
|
DXY – Sideways.
The dollar extended its gyrations within 84.00-84.50 throughout Thu and was
last seen around 84.32. This index remained underpinned by the intra-day
ichimoku cloud. Bulls await fresh cues from economic data tonight with retail
sales and consumer confidence on the tap. Expectations for the data to show
mild improvements could keep downsides cushioned. Support is still seen
around 84.09 ahead of the next at 83.72. Barrier at 84.53 and a break here
could bring the index towards 84.753 (2013 high).
USD/JPY – Downside Bias. USD/JPY has climbed to highs not seen in nearly 8
years to 106.89 but further upmoves were stalled by offers ahead of 107.00.
Pair has since corrected slightly this morning to around 106.75 as dollar
softened slightly. With domestic cues lacking, pair appears to move in tandem
with the dollar. So with the softer dollar tone today, look for the pair to
hover rangy with 106.55-107.00 with the bias tilted slightly to the downside.
AUD/USD – Bear Dominates. The AUD/USD is back on the downward drift, caving in to
dollar resilience. The jobs report was regarded as an irregularity (or rather
noise) and investors preferred to sell into rallies. Pair is now back around
the 0.9090, well under the support seen at 0.9154 and could be on its way
towards 0.9065. There are fewer data cues today and we may not see a repeat
of choppy action, at least within the Asian session. Bias still to the
downside, as flagged by the MACD.
EUR/USD – Stuck In Range. EUR/USD was still around
1.2920, not inspired by CPI releases out of core economies on Thu. This pair
is closing in on the 4-hourly ichimoku cloud and could remain capped below.
18-SMA is still under 40-SMA. There is a lack of directional clarity and pair
could be range-trapped within 1.2870-1.2993. Beyond intra-day trades, bias is
still to the downside as indicated by the 18-DMA which is still below the
40-DMA. Next support is marked at 1.2822. |
EUR/SGD – Range-Bound. The EUR/SGD cross entered the thin ichimoku cloud on the 4-hourly chart and
could remain in neutral state at this stage. RSI prints 55, suggesting rooms on
both sides while MACD forest has tapered towards the zero line on the intra-day
chart. Barrier is still seen around 1.6380 while downsides are likely to be
deterred by 1.6210. US data releases tonight could move the cross and investors
would be vigilant for better directional cues.
Regional FX
The SGD NEER trades 0.05% below the implied mid-point of 1.2635. We
estimate the top end at 1.2382 and the floor at 1.2887.
USD/SGD – Stuck-In-Range. After the swing higher starting at the beginning of
the week, the USD/SGD seems to be in consolidation currently, hovering within
the 1.2616-1.2670 range. Pair is only slightly higher today around 1.2640
currently, helped by upticks in the SGD/MYR this morning. With intraday
momentum indicators lacking direction cues this morning, pair is likely to
remain stuck in its current trading range today. Look out for moves towards the
1.2700-handle, while a move below 1.2616 could see a move back below the
1.26-handle.
AUD/SGD – Two-Way Trades. The AUD/SGD is
continuing its slide from yesterday, sighted currently around 1.1492, dragged
down by AUD weakness. inching back higher after hitting a low of 1.1536 yesterday
on the back of relative AUD strength. While intraday MACD is showing little
momentum in either direction, RSI is indicating oversold conditions currently,
suggesting two-way trades are possible today. With our support at 1.1534 taken
out, new support is seen around 1.1476 before the next at 1.1426. Resistance
today is around 1.1558. SGD/MYR – Rangy. The SGD/MYR slipped out
of the intraday ichimoku cloud yesterday but is back within the cloud this
morning. Cross is currently sighted higher around 2.5293 underpinned by
relative MYR weakness today. Back within the ichimoku cloud, technical support
is seen around 2.5282 still, with a move below risking a deeper pull-back
towards 2.5200. Topside remains guarded by 2.5341 ahead of the next at 2.5400.
USD/MYR – Supported. USD/MYR hovered around 3.1975,
underpinned by dollar resilience. Pair still retains a buoyant tone and we
continue to count on support around 3.1867 to cushion downsides. A decisive
clearance of the 3.2032 exposes the next barrier around 3.2240. 1-month NDF
edged higher to levels around 3.2040, last seen around 3.2045. Support is seen
around 3.1964, marked by the 40-SMA on the 4-hourly chart. Bullish pressure
waned though there is still hardly any bearish signal. Expect price moves to
remain supported. Malaysia’s industrial production growth in Jul eased to
4.3%y/y from the previous 7.0%. Our economic team attributes it to a high base
from last year. Global industrial production trends remain stable and near-term
outlook remains positive. Manufacturing sales growth decelerated to 1.4%y/y in
Jul in tandem with weaker export trends, weighed by festive holiday season,
stronger MYR and high base effect.
USD/CNY was fixed slightly higher at 6.1468 (+0.0015), vs.
previous 6.1453 (+2.0% upper band limit: 6.2722; -2.0% lower band limit:
6.0263). CNY/MYR was fixed at 0.5208 (+0.0000). USD/CNY – Downside
Bias. Pair steadied around 6.1320 this morning, still near its recent
low of 6.1281. This firmer USD/CNY mid-point fixing likely deterred aggressive
offers. Still, intra-day momentum indicators suggest slight downside bias and
pair could remain at the lower bound of the 6.1260-6.1570 range. In news,
the government will introduce mixed ownership and central
government-administered SOEs will seek to public listing as a ultimate goal
(China Securities Journal). Elsewhere, a five-year plan is drawn for petroleum
and chemical industry to eradicate outdated capacity (Economic Information
Daily).
1-Year CNY NDFs – Bullish Risks in Range. The NDF hovered around 6.2270, still capped by the
6.2293-barrier but has crossed above the 40-SMA, 18-SMA and the intra-day
ichimoku cloud. Pairing is still within range though we see risks are to the
upside with a possible upmove towards 6.2350 next. USD/CNH – Rangy.
USD/CNH is also on the upmove but little momentum is noted on the charts. Last
seen around 6.1370, further bids could lift the pair towards the next barrier
around 6.1430 but that will not reverse the downtrend. CNH trades at a discount
to CNY.
USD/IDR – Bullish Bias. USD/IDR tested our barrier at 11840 this morning but
has since eased off to hover around 11830 at last sight. BI’s policy decision
yesterday to hold rates steady did not impact the pair significantly yesterday.
Aside from Fed rate hike concerns and concerns about the current account
deficit, there are also concerns about the president-elect’s cabinet choices,
his ability to build a parliamentary majority and his determination to deal
with the problems facing the economy, particularly fuel price subsidies and
nationalistic policies that keep the pair supported ahead. With the pair within
striking distance of our strong resistance at 11840, a firm break here could
see the pair headed towards the 11900-handle. Support remains around 11750.
Continued risk aversion today could see the sell-off by foreign funds continue,
weighing on the IDR today. Yesterday, foreign funds sold a net USD50.78mn in
equities. The 1-month spiked is wobbling around the 11900-handle this morning.
Currently the 1-month is sighted around 11901 with the four-hourly MACD now
showing increasing mild bearish momentum. Once again, the JISDOR was fixed
higher at 11831 (yesterday: 11782) – a high not seen since 8 Aug. As expected,
the BI kept its key rates unchanged at yesterday’s policy meeting. Both the
reference rate and the FASBI rate were held steady at 7.50% and 5.75%
respectively. Despite manageable inflation and sub-par economic growth, BI has
little policy space to move because of the persistent current account deficit.
As such, our economic team expects the BI to continue to hold rates steady for
the rest of the year.
USD/PHP – Supported.
After edging lower yesterday following the BSPO rate hike, the USD/PHP is back
on the upswing this morning, spurred by the firmer tone in the dollar as well
as possible unwinding of rate hike bets. Pair is currently hovering around
44.015, just a tad above our resistance at the 44.000-figure. Underpinned by
expectations of a firmer dollar tone, a break of this level, could see the pair
headed towards the next barrier at 44.125 and then to 44.290 (8 Aug high).
Support is still seen around 44.750. The 1-month NDF spiked above the
44.000-handle yesterday before coming off to end the session below that handle.
After hovering below the 44-handle for most of the session, the 1-month NDF is
back above that level at around 44.060 at last sight, in tandem with the spot.
Four-hourly MACD is showing little momentum in either direction current,
thought the RSI is indicating an approach towards overbought conditions. As
expected, the BSP hike its overnight borrowing rate by 25bp to 4.0% at its
policy meeting today. At the same time, it also raised the Special Deposit
Account (SDA) rates by 25bp to 2.50%. These were pre-emptive moves to prevent
second-order effects from rising food prices and utility costs, as well as to
curb excessive credit growth. Our economic team now thinks that a further 50bp
hike in the policy rate is possible for the rest of the year should inflation
fail to slow significantly.
USD/THB – Overbought. USD/THB again took out another of our barrier, this
time at 32.185, on its way up overnight. Pair is still on the uptick on Fed
rate hike concerns and is within striking distance of our next barrier at
32.245. Pair is currently sighted around 32.228 and looks overstretched at this
point in time. Risk appetite remained weak with foreign funds selling off a net
THB0.18bn and THB8.63bn in equities and debt yesterday, keeping the pair
supported. Underpinned by continued firmer tone of the dollar, bids are likely
to meet resistance at 32.245, though a firm break here would expose the next
hurdle at 32.290. The new government will release its economic policy statement
today at the National Legislative Assembly. According to our economic team, the
statement is likely to emphasize plans for infrastructure improvements and
plans for more efficient budget disbursement and tax collection.
Rates
Local government bonds traded mixed with better buyers seen late during
the day as the 10y MGS 7/24 gapped 3bps lower. We expect levels to remain
rangebound ahead of the MPC next week. Most are positioned light for a hike
with players looking at that knee jerk selloff in the event it happens.
The IRS market was quiet with no trades reported. There was some
interest in paying from hedging activities for the 5y at 4.04%, but receiving
interest remained aplenty. Paying in basis persists given ample liquidity.
In the PDS market, trading activity returned with better sellers on
shorter maturities probably on rate hike expectation. Higher yielding AA1 and
AA3 rated papers such as Sarawak Energy Berhad and Jimah Energy were active,
but AAA names were relatively muted with only a few names such as Aquasar and
Plus were spotted with trades.
Singapore
SGS market stabilised after several days of selloff. At opening bonds
generally traded 3bps higher before recovering some grounds later the day
closing about flat for the day. We saw pretty soft sentiments in the morning
but as the day went along, bids started surfacing after lunch. At market close
the SGS curve ended pretty much unchanged.
Asian credits were stronger after the softness of yesterday. Spreads
generally remained firm although a touch 1-2bps wider. The new China Great
Wall, which printed at CT2+210bps, traded tighter to 207/206 on the back of it
stronger SBLC guarantee from BOC. Apart from that, focus was mainly on new
books opening. UOB is issuing a 5y senior USD (Aa1/AA-/AA-) with guidance of
CT5+85bps. ICICI Bank is issuing a 5.5y senior USD (Baa2/BBB-) guiding at
CT5+200bps area. Haitong UT Capital is issuing a 3y CNH with guidance of 5.60%
area.
Indonesia
Indonesia central bank continue halts its reference rate at 7.50% which
came in as what our economist expected as well as what economist consensus
predicted. LCY bond market ended up negative as there was minimum market
sentiment which could drive bond market higher. 5-yr, 10-yr, 15-yr and 20-yr
benchmark series yield stood at 7.911% (+1.9bps), 8.162% (+4.0bps), 8.499%
(+3.1bps) and 8.669% (+3.8bps) while 2-yr yield shifts up to 7.489% (+1.9bps).
Trading volume remains heavy amounting Rp10,357 bn from Rp11,465 tn with FR0069
(5-yr benchmark series) and FR0071 (15-yr benchmark series) as the most
tradable bond. FR0069 total trading volume amounted Rp2,823 bn with 39x
transaction frequency and closed at 99.855 yielding 7.911% while FR0071 total
trading volume amounted Rp1,523 bn with 48x closed at 104.133 yielding 8.499%.
Indonesian government conducted debt switch auction yesterday and
received Rp2.68 tn bid from the investors which plans to participate. However,
only Rp0.31 tn nominal was won by DMO. Details in regards to the debt switch
auction yesterday will be available at our weekly fixed income reports.
Corporate bond traded heavy amounting Rp816 bn (vs average per day (Jan
– Jul) trading volume of Rp684 bn). BEXI02CCN1 (Shelf registration II Eximbank
Phase I Year 2014; C Serial bond; Rating: idAAA) and ADMF02BCN3 (Shelf
registration II Adira Finance Phase III Year 2014; B Serial bond; Rating:
idAA+) was the top actively traded corporate bond. BEXI02CCN1 total trading
volume amounted Rp234 bn yielding 9.18648% while ADMF02BCN3 total trading
volume amounted Rp226 bn yielding 10.25817%.
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