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v U.S. dollar firm up following remarks
from voting member Dennis Lockhart
v Euro ends on a weaker note to levels
last traded in mid-July on the back of strong US Dollar and weaker than
expected economic data from Eurozone
v Japanese Yen on the back of firmer
volatility pushes spot up through 124.5
v RM
was the only Asian currencies that was making new highs and maintaining that
level given the relatively weak reserves coverage ratio
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US Dollar firmed
up following remarks from voting member Dennis Lockhart that “it would take a
“significant deterioration in the economic picture” for him to not support a
rate hike in September. Market is not quite pricing for the first rate hike
in September and for the October meeting the probability of a rate hike at
the October 28 meeting is just under 40% as per calculations by CME based on
where the Fed Funds Futures are trading currently. The recovery also tracked
higher US yields and to a lesser extent, the highest ISM non-manufacturing
print since 2005 and the decline in oil prices. WTI sold-off to US$44.8,
which is the lowest level seen since March 20 as Department of Energy
reported product builds and a production uptick. The 2-year US yields which
tracking Bunds hit a new trend high of 0.756%.
Euro ended on a
weaker note to levels last traded in mid-July on the back of strong US Dollar
and weaker than expected economic data from Eurozone pushed it lower.
Eurozone retail sales fell by 0.6% in June well below analyst expectations of
a 0.3% drop. The Greek stock market plunged after a 5 week shutdown brought
on fears the country was about to dump from the Euro highlighting the fact
that Greek bailout needs more working out. Focus stayed with British Pound as
‘Super Thursday’ arrives as Bank of England’s monetary policy committee which
the central bank released for the first time its latest interest rate
decision, its meeting minutes and the high-profile quarterly Inflation Report
on the very same day. The meeting minutes and the post-Inflation Report
conference revealed that a small minority group of BOE members have started
to vote for a rate rise.
Japanese Yen on
the back of firmer volatility pushed spot up through 124.5 and flirted with
125 handle after an upbeat Markit final services PMI. It has been fairly
breath taking especially yield differential conviction is relatively weak and
Bank of Japan stood pat and retained its growth/inflation assessment.
Governor Kuroda continued to reiterate that the central bank doesn’t see the
need for further easing at this juncture.
Asian currencies
with an exception of Indian Rupee, Taiwanese dollar and Hong Kong dollar
ended broadly lower against US dollar. Leading the top losers was Ringgit
Malaysia, which fell 1.91%, followed by Singapore dollar of 0.56% and
Japanese Yen of 0.30%. Singapore dollar was boosted by fresh selling by hedge
funds and interbank players as well as some position adjustments ahead of the
long jubilee weekend in Singapore.
Ringgit Malaysia
was the only Asian currencies that was making new highs and maintaining that
level given the relatively weak reserves coverage ratio with the short term
debt to reserves ratio close to 100% and reserves to import cover also barely
over 6 months’ worth of imports. Stronger-than-expected trade surplus which
grew to RM7.98 billion (RM5.51 billion in May) arising from unexpectedly
increased 5% in exports however failed to excite markets positioning. The
currency gapped up to trade to 3.9265 on lower oil prices and strong selling
in local equity while the 1-month NDF continued to surge higher to trade
above 3.9100. Foreign institutions were net sellers of local equity at RM2.9
billion in July 2015 and year-to-date, net foreign selling has amounted to
RM11.6 billion respectively.
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From US: Fed Lockhart Speech, NFIB Business Optimism
Index (Jul), Unit Labour Costs Preliminary Q/Q (Q2), Nonfarm Productivity
Preliminary Q/Q (Q2), Wholesale Inventories M/M (Jun), Fed Dudley Speech,
JOLTs Job Openings (Jun), Monthly Budget Statement (Jul), Retail Sales M/M
(Jul), Initial Jobless Claims (8 Aug), Continuing Jobless Claims (1 Aug), Export
Prices Y/Y (Jul), Import Prices Y/Y (Jul), Core PPI M/M (Jul), Industrial
Production M/M (Jul), Michigan Consumer Sentiment Preliminary (Aug).
v From Eurozone: Eurozone Zew
Economic Sentiment Index (Aug), Eurozone Industrial Production M/M (Jun), ECB
MP Meeting Accounts, Eurozone Inflation Rate M/M (Jul), Eurozone GDP Growth
Rate Flash Q/Q (Q2), UK Unemployment Rate (Jun), UK Inflation Rate M/M (Jul),
UK Retail Price Index M/M (Jul), UK Retail Sales M/M (Jul).
v From Asia: Japan Current Account (Jun), Japan BOJ Monthly Report,
Japan Machine Tool Orders Y/Y (Jul), Japan Industrial Production Final M/M
(Jun), Japan Machinery Orders M/M (Jun), China New Yuan Loans (Jul),
China Industrial Production Y/Y (Jul), China Retail Sales Y/Y (Jul),
Singapore GDP Growth Rate Final Q/Q (Q2), Singapore Retail Sales M/M (Jun),
Malaysia Industrial Production Y/Y (Jun), Malaysia Current Account (Q2),
Malaysia GDP Growth Rate Q/Q (Q2).
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INDICATIVE MAJOR CURRENCIES
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