HLBB Daily - USD rebounds, all eyes on 4Q US GDP tonight

Key Takeaways

Ø USD rebounded against 8 G10s, rising on extended weakness in the markets that ramped up demand for safety as well as on the back for firmer US data. The Dollar Index closed higher at 97.43. Nonetheless, we continue to expect USD to retreat leading into US trade ahead of US GDP data and Fed Chair Yellen’s speech on policy. Meanwhile, MYR advanced 0.11% to 3.6620 against USD after rallying in European trade. MYR is likely weaker on paring of positions ahead of the weekend’s close coupled with a firmer overnight USD, but we caution that strong slide in USD leading into European trade could generate small gains

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Ø St. Louis fed President Bullard said that ‘it may be a good time to normalize monetary policy’ and that it will “remain exceptionally accommodative” following normalization.  Opinions increasingly diverged on the timeline of the rate hike. Data wise, prints from the US and UK were mostly upbeat. On the contrary, inflation and household spending in Japan pointed to sluggish economic momentum while industrial production in Singapore was equally unimpressive.

Ø In the MYR bond space, local govvies ended supported with yields easing across the curve. Details for the new issue of 7-year MGS were announced with tender size coming in at RM4b. Tender date for mentioned bonds scheduled on next Monday. Trading volume in MYR govvies was over RM3.4b transacted. Continue to see strong interest for GII with combined volume of RM1.6b, matching close to 50% of govvies traded yesterday. WI for the new MGS 9/22 was seen traded at 3.750%. With UST creeping higher, we could potentially see some mild consolidation in local govvies.