FW: RHB FIC Rates & FX Market Update - 4/11/14

4 November 2014

Rates & FX Market Update

UST, Gilts Down on Robust Manufacturing; Global Currencies Broadly

Lost on Stronger Greenback; BoJ Move Credit Positive Says Moody’s

Highlights

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¨     Robust manufacturing data continued to bolster higher interest rates expectations in the US and UK sending UST and Gilt yields 2-4bps higher; the greenback was broadly stronger against global currencies while GBP held firm. By contrast, the Eurozone’s manufacturing PMI print failed to meet preliminary expectations and was marginally down to 50.6pts (-0.1pt); the EUR continued its descent towards its near term support of 1.2365 while govies reversed Friday’s rally with PGBs leading underperformance. Moody’s stated that BoJ’s surprise stimulus is credit positive for the sovereign rating and spurring inflation and sentiment; the JPY touched a session high of 114.22, breaching its 113.6 resistance. AUD broke below its 0.8687 support while ACGBs continued to bull steepen overnight underscoring global policy divergence; latest trade balance figures indicated deterioration in the deficit due to softer exports.

¨     Asian govies were mixed while currencies lost against a stronger USD. South Korean CPI declined on m-o-m basis as softer commodity and food prices eased inflation further adding further pressures on BoK; the KRW inched closer towards the 1074.2 resistance level. THB broke above its 32.696 near term resistance while short-end ThaiGBs advanced; Oct CPI figures were lower due to lower food and energy prices. IndoGBs extended gains overnight with yields down 1-6bps following encouraging manufacturing PMI and trade balance figures while softer CPI numbers failed to meet expectations. In India, further signs of a pickup in the economy were prevalent with an uptick in manufacturing PMI; INR was largely unmoved by the bullish USD.

¨     USDMYR retreated to a 4-month high, touching 3.3282, as market action was largely dictated by strong US manufacturing ISM data that extended optimism over the Fed’s imminent tightening cycle. The USDMYR continues to signal strong bullish momentum as the 50-day MA broke above the 200-day MA where we opine any downside surprise to US jobs data may present tactical short opportunities given that the currency is in oversold territory.

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