Weekly FX Update, 11 May 2015

v  The release of mixed US data during the week left the US dollar on a depreciating bias v  Euro touches its two-month high of 1.139 against the greenback along with other positive economy data v  Sterling respond positively to the outcome of the UK general election v  Asian currencies are broadly weaken against the greenback v  RM  closes 0.02% lower against the USD on the back of stable crude oil price during the week along with the global selloff pressure  The released of mixed US data during the week left the US dollar on a depreciating bias, with the US dollar index declined 0.5% to trade below 95.0. The ADP National Employment Report showed US private employers added 169,000 jobs in April, the fewest since January 2014 and far below economists’ forecasts of 200,000. The ADP numbers suggested the nonfarm payroll will fall short of 230,000 forecasted despite the recent positive claims data and ISM surveys. This together with the weaker-than-expected nonfarm productivity and the widening US trade deficit sent the US dollar index lower against other major currencies. Meanwhile, Federal Reserve Chair Janet Yellen warned that both stocks and bonds are richly valued. The warning from Yellen resulted in selloff of long term US Treasuries and also the major US equity bourses. In response to the selloff of US dollar, the euro touched its two-month high of 1.139 against the greenback along with other positive economy data and the hike in German bund yields. The European Commission lifted the Eurozone growth forecast for 2015 to 1.5% from the previous forecast of 1.3%, and the expected inflation was revised up to 0.1% from -0.1%. Meanwhile, the upward revised of euro area final composite PMI, which is consistent with the improving tone of euro data, helped to support the appreciation of EUR against the US dollar. At the same time, the 10-year German bund yields hitting their highest levels of the year at 0.6% eased concerns that the yield could hit negative levels also helped to support the strengthening of EUR. In the UK election last week, the prime minister, Cameron, lead Conservative Party won an overall majority in the general election. Sterling responded positively to the outcome as the worst case concerns over future political instability were allayed. The conservatives won 331 seats out of a total of 650, giving them a small working majority of 5 seats. Asian currencies were broadly weaken against the greenback. Leading the pack were Indonesian Rupiah that reported an unexpected shrank for a second straight quarter as exports and government spending dropped, followed by Korean Won and Indian Rupee as overseas funds pulled money from local markets amid a rout in global equities and debt. The Rupiah weakened further despite the Bank Indonesia and the government pledged to speed up government spending and to prepare a mix of monetary policy changes. Last week, Ringgit Malaysia closed 0.02% lower against the US dollar on the back of stable crude oil price during the week along with the global selloff pressure and plunge in local equity. The oil prices continued to rally during the week, with Brent oil prices touched the fresh 2015 high at US$69.6/bbl, supported by the slow output from Libyan and the civil war in Yemen which increased the risk of supply disruptions across the Middle East Gulf producers. On macro front, there were two by-elections of which Barisan Nasional won at Rompin while Pakatan Rakyat won at Permatang Pauh. Meanwhile, exports rose 2.3% in March, exceeding the economists’ forecasts of 5.0% contraction, driven by sales of electrical and electronic and timber-based products. The sharp increase in exports resulted in the widening of March trade surplus to RM7.82 billion. At the same time, Bank Negara Malaysia kept the Overnight Policy Rate (OPR) steady at 3.25%, citing the stance of monetary policy remains accommodative and supportive of economic activity.