FX
Global
The post-Fed cheer extended into Thu New York
Session as DJI and S&P 500 marched on to record highs, shrugging off the fall
in housing starts in Aug as well as the decline in Philly Fed Business
outlook. DJI closed +0.6%, S&P at +0.5% and NASDAQ at +0.7%. USTs
remained offered with 10-yr yields buoyant around 2.62%. Earlier, the take-up
in TLTRO disappointed but EUR edged back into familiar ranges, last printed
1.2918 as we write.
The result of the Scotland referendum is the key
event of the day, supposedly out at London breakfast time. Polls so far
suggested that majority has voted against independence. GBP/USD holds a bid
tone, last seen at 1.6450.
In Asia, PBOC stole the limelight by lowering its
14-day repo rate by 20basis points to 3.50%, easing liquidity conditions for
the second time this week amid weak economic data and lending. This was after
the central bank injected CNY 500bn of liquidity via its SLF to its five
largest banks. Early starters Nikkei is up 0.9%, buoyed by the elevated
USD/JPY. Kospi was also up +0.5%. Expect rest of Asia to also benefit from
the risk-on sentiments. |
G7 Currencies
|
DXY – Consolidates. The DXY slipped to levels
around 84.25 this morning as bulls continue to take a breather from its
recent upmove. Despite the upgrade in median rate projections, schedule of
the rate hike seemed to have remained unchanged. The greenback could afford a
period of consolidation before the next bullish cue. Expect 84.753 to remain
the barrier for the index while the 84-figure acts as interim support ahead
of 83.72.
USD/JPY – Buoyant. The USD/JPY is still on the
uptick this morning after breaking out of its recent tight trading range to
above the 108-handle post FOMC. Pair hit a new high of 108.68 this morning, a
high not seen since 9 Sep 2008’s 109.08, before coming off to hover around
108.43. Pair could
still remain buoyant given mild bullish momentum on the intraday chart,
though the pair looks overstretched currently. 108.76 is the new barrier to
cross and a break of this level is needed for bullish extension to continue
towards the next barrier at 109.08. We need to see the hurdle at 107.48 taken out
for bullish extension to continue. BOJ governor’s speech in Tokyo will be
eyed for hints of additional easing moves today.
AUD/USD – Sideways. AUD/USD hovered around 0.8990
in early Asian trades in the absence of stronger cues. The pair is weighed by
a shaky China growth prospect as well as bullish USD undertones. Risks are
thus, still to the downside though momentum is lacking currently. Expect heavy
trades to continue with unexpected bids to be capped by eager sellers around
the 0.91-figure. Support stays at 0.8909.
EUR/USD – Range-Plays. Turns out that the dip under the 1.2877-support was brief and EUR/USD
climbed back into familiar ranges despite the poor take-up in the TLTRO
auction. The dollar correction could continue to lend tentative support for
this pair. 18-SMA tracks the 40-SMA closely and once again, there is a lack
of directional cues. Expect range-trading to extend within the wider
1.2820-1.2993 range. |
EUR/SGD – Sideway Drifts. The EUR/SGD has settled into sideway drifts with much
of intra-day action confined within the 1.6290-1.6400 range. This cross was
last seen at 1.6365. The dollar correction keeps dips supported in this pair at
the moment. The lower bound of the range at 1.6290 should continue to keep
downsides cushioned, failing which would expose the next support at 1.6210.
Momentum indicators on the 4-hourly chart do not inspire and we expect this
cross to extend gyrations into the weekend.
Regional FX
The SGD NEER trades 0.20% above the implied mid-point of 1.2702 with the
top end estimated at 1.2448 and the floor at 1.2955.
USD/SGD – Range-Bound. After rallying to a high of 1.2696 yesterday, the
pair is waffling this morning, sighted around 1.2670. Intraday charts are still
showing a lack of momentum in either direction today. We look for the pair to hover range-bound today
within 1.2616-1.2700, though risks are to the upside given expectations of a
firmer dollar. A break of A break of 1.2700 would expose the next stronger
barrier at 1.2721 (76.8% Fibonacci retracement of the Jan-Jul downswing).
AUD/SGD – Two-Way Trades. The AUD/SGD is on
the slide this morning after rebounding slightly yesterday. Downside pressures
on the AUD are helping to push the cross lower today. Cross is currently
hovering around 1.1383 with momentum still lacking as indicated by our intraday
charts. We continue to expect the cross to remain in two-way trades within
1.1275-1.1532 today, though risks are to the downside given the weakish AUD. SGD/MYR
– Rebounding. After SGD/MYR bounced higher this morning following the BNM’s decision
to hold the OPR steady. Cross spiked temporarily to 2.5597 in the morning
before easing to 2.5569 currently on the back of possible short-covering. With
our barrier at 2.5547 taken out this morning, next hurdle to cross is 2.5630.
2.5400 should be supportive today.
USD/MYR – Rangy. BNM kept OPR unchanged at 3.25%, contrary to our
expectations. USD/MYR rose a tad to levels around 3.24-figure before steadying
thereabouts. Bond markets are on the rally this morning, keeping a lid on
USD/MYR bids. Pair should remain lofty for the rest of intra-day trades.
Support is seen around 3.2240. 3.2492 is eyed as the next resistance. 1-month NDF bounced above the
3.26-figure before slipping back to 3.2480 levels. 18-SMA on the 4-hourly chart
still guides the pair higher. Dips to meet support around 3.2372 while bids are
unlikely venture much above the 3.26-figure. Our economic team views the latest
BNM report as less hawkish than before with growth taking precedence and expect
no change in OPR for the rest of 2014. Next rate adjustment is expected in
2H2015.
USD/CNY was fixed at 6.1455 (-0.0035), vs. previous 6.1490
(+2.0% upper band limit: 6.2709; -2.0% lower band limit: 6.0250). CNY/MYR was
fixed at 0.5269 (+0.0016). USD/CNY – Back in Range. Pair
slipped in tandem with the dollar slide as well as the lower mid-point fixing
this morning, last seen around 6.1380. Pair is still within the 6.1348-6.1530
range and RSI suggests more scope for downsides. Any further offers below the
6.1348-support could meet support at 6.1292. In the second move to ease
liquidity, PBOC sold CNY10 bn of 14-day contracts at 3.5% compared to 3.7% at a
16 Sep auction in a move to lower risk-free rates. Elsewhere, Alibaba raised USD21.8bn
in a US IPO. It will debut tonight in NY session.
1-Year CNY NDFs – Bullish. The NDF extended its slide to levels around 6.2365
this morning, approaching support at 6.2350. Intra-day momentum has turned a
tad bearish and further slides could send prices towards next support at
6.2298. USD/CNH – Offered. USD/CNH slipped towards the intra-day
ichimoku cloud at around 6.1450 this morning and momentum indicators more
bearish pressure abound. Support at 6.1375 could be challenged and a break here
exposes the next at 6.1320. CNH now trades at a narrower discount to CNY,
catching with onshore prices.
USD/IDR – Mild Upticks. The USD/IDR is bouncing higher this morning after
yesterday’s slide with the pair currently back above the key
12000-psychological level at 12003. Intraday MACD though is showing waning
bullish momentum. Aside from expectations of yield compression when the Fed
normalizes rates, concerns about the president elect’s cabinet choices, his
ability to garner a majority in Parliament and his commitment to deal with the
economic problems, including the fuel prices subsidy issue, amid calls for
nationalistic policies could all keep the pair supported ahead. However,
possible central bank moves to smooth out volatilities could cap upside ahead.
Resistance remains around 12100 today, while 11950 continues to be supportive.
Foreign funds again sold off a net USD56.77mn in equities yesterday, but this
was offset by their addition of a net IDR0.46tn to their outstanding holdings
of debt on 15-16 Sep. The 1-month NDF remained above the key
12000-psychological level this morning, sighted around 12074. Still further
upside could be capped given bearish momentum as shown by the four-hourly
chart. The JISDOR was fixed above the key 12000-level yesterday at 12030 for
the first time since 27 Jun, up from 11908 on Wed. BI governor commented yesterday that the central bank’s ability
to support the economy is limited due to global conditions, suggesting
that rate cuts are unlikely ahead.
USD/PHP – Bullish
Bias. The USD/PHP continues to bounce higher this morning, sighted
around 44.605 currently. Intraday MACD continues to show only mild bullish
momentum. With our barrier at 44.580 taken out this morning, next barrier is
seen around 44.700 today ahead of 44.820. Offers are likely to be met by
support around 44.125 today. The 1-month NDF is on the mild slide this morning,
hovering around 44.650 with intraday MACD showing little momentum in either
direction ahead.
USD/THB – Wobbling. USD/THB is wobbling this morning after correcting slightly yesterday
from its opening. Pair is sighted around 32.238 currently with intraday MACD
showing little momentum in either direction. An intraday ichimoku cloud is
forming below and this could determine price action ahead. Look for two-way
trades today with offers supported around 32.185 today, while bids met by
immediate resistance at 32.290 ahead of 32.355. Not helping the THB yesterday
was foreign selling. Foreign funds sold a net THB0.09bn and THB8.13bn in
equities and debt yesterday.
Rates
Malaysia
Local government market was thinly traded throughout the day with buyer
seen on the front-end benchmarks 3y 3/17 and 5yr 10/19 as the bonds dipped 2bps
and 1bp respectively. Trading positions were light likely that players were
hoping for a knee jerk reaction in the event of a hike to collect at lower
prices. At the MPC meeting, BNM decided to hold OPR at 3.25%. Market should see
some knee-jerk rally especially the relative rate-sensitive front ends, but we
don’t expect the rally to be significant as the monetary policy tone is not
outright dovish.
The IRS curve in general shifted 1bp lower, probably due to more
squaring of paid positions. Slight higher overnight UST yields didn’t have too
much impact on the IRS curve. 5y was traded at 4.035% and 4.03%. 3M KLIBOR
stayed unchanged at 3.74%.
The PDS market saw good two-way flows especially the higher grades. Bank
Pembangunan's 15-year GG recorded volume at just above the MYR100m mark. Longer
duration papers were sought after, while shorter durations were thinly traded.
In view of BNM's no hike decision, we expect buying interest to return to the
shorter end of the curve in the coming trading sessions.
Singapore
SGS market was muted despite some slight changes in the expectation of
the rate hike from the US as the FOMC committee kept things pretty much
unchanged. Bond prices didn't open very much lower despite SGD IRS opening
higher by 3bps. The curve flattened in line with the UST, although this could
be temporary. We prefer to take profits on paid positions and be cautiously
received for a while.
Asian credit saw good two way flows, but skewed more towards selling
with accounts taking profit in some of the new issues. Chong Hing Bank is
issuing USD300m AT1 Perp NC5 at the guidance of 6.50-6.625%. Order book was
overwhelming in excess of USd5b in orders. China Coal Solution also launched a
2y SGD175m issuance at 7.50%. This HY issuer is a coal supply chain management
company. Islamic Development Bank, meanwhile, is issuing 5y USD sukuk with
guidance of MS+10/12bps. We heard that the book has indicative of interest of
more than USD1.5b. This should do well after issuance with the strong anchors
interest that we see.
Indonesia
Indonesia bond market moved mixed during the day as it opened with a
negative tone while closed with slightly higher prices. The negative tone
during morning session was mostly due to FOMC result which despite maintaining
FFR unchanged at 0.25% but continue to cut its stimulus package by US$10 bn.
Moreover, FOMC meeting which decided to raise their FFR median estimate for the
year 2015 – 2017 have contribute to the morning session bond price weakness. On
the second session, bond prices moved towards positive direction as Luhut
Binsar Pandjaitan, a senior advisor to President Jokowi’s team told the media
at a media briefing at CLSA’s annual conference that Jokowi would increase
subsidize fuel price by Rp3,000,- by November 2014. This will give Jokowi an
additional fiscal space and also allows Jokowi’s cabinet to allocate the budget
to infrastructure spending. Further, the expectation of better growth has made
bond prices moved higher during second session. 5-yr, 10-yr, 15-yr and 20-yr
benchmark series yield stood at 8.064% (+1.7bps), 8.283% (-0.9bps), 8.573%
(+1.9bps) and 8.866% (+1.2bps) while 2-yr yield stayed unchanged at 7.551%.
Trading volume remains heavy amounting Rp8,841 bn from Rp16,163 tn with FR0068
(20-yr benchmark series) and FR0070 (10-yr benchmark series) as the most
tradable bond. FR0068 total trading volume amounted Rp2,084 bn with 140x
transaction frequency and closed at 95.484 yielding 8.866% while FR0070 total
trading volume amounted Rp1,820 bn with 133x closed at 100.592 yielding 8.283%.
Corporate bond traded thin amounting Rp347 bn (vs average per day (Jan –
Aug) trading volume of Rp657 bn). SDRA01SB (Subordinate Bank Saudara I year
2012; Rating: idBBB+) was the top actively traded corporate bond with total
trading volume amounted Rp124 bn yielding 12.615%.
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