Daily FX Update, 13 May 2016

v  Fed’s George: Interest rates are too low v  Fed’s Rosengren: Rate hikes should resume v  Fed’s Mester: Recent inflation data are ‘encouraging’ v  Bank of England holds key rate at 0.5%, sees Brexit risks v  Malaysia March industrial output up 2.8%; manufacturing sales value down 0.6%

OVERNIGHT MARKET UPDATE: ·         US – 2016 FOMC voting members speeches: Ø  George: "Moving rates to a more-normal level and at a gradual pace is necessary to minimize distortions in the economy that can build over many years when rates are held so low." Ø  Rosengren: “The market remains too pessimistic about the fundamental strength of the US economy, and the likelihood of removing monetary accommodation is higher than is currently priced into financial markets based on current data.” Ø  Mester: “The most recent data are encouraging and consistent with the Fed policy committee’s view that inflation will gradually move back to target over time.” ·         US – The April import prices fell 5.7% y/y compared to a 6.1% drop in March. The drag on import prices from USD strength and energy price weakness continues to fade. ·         UK – Bank of England kept its key policy rate unchanged at 0.5% and maintained the asset purchase program at GBP375 billion. With about six weeks to go before the 23rd June binding referendum on EU membership, the Bank issued a stark warning over the potential costs of UK exit from the EU. ·         Currencies – The USD caught a slight bid last night, but the trend was weak. JPY strengthened, EUR fell, and GBP did a nice round trip post the BoE. ·         Equities – US stocks erased earlier declines amid a rebound in crude oil prices, which offset further falls in Apple shares, with both Dow Jones and S&P500 closed flat. ·         Rates – UST 10-year yield rose 3 bps, supported by hawkish Fed member comments.  ·         Energy – Crude oil prices finished higher, buoyed by expectations that declines in global production will ease the glut of crude supplies, despite a stronger USD. ·         Precious Metals – Gold prices edged lower on the back of renewed strength in the USD despite the data that showed a spike in first-quarter demand for gold.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 4.0250 4.0110 4.0500 4.0090 4.0540 JPY/MYR 3.6944 3.6750 3.7160 3.6600 3.7400 SGD/MYR 2.9313 2.9130 2.9520 2.9100 2.9700 EUR/MYR 4.5829 4.5640 4.6050 4.5400 4.6300 AUD/MYR 2.9491 2.9300 2.9670 2.9100 2.9900 GBP/MYR 5.8218 5.7980 5.8440 5.7700 5.8900 USD/JPY 108.95 108.88 109.29 108.48 109.48 EUR/USD 1.1386 1.1220 1.1530 1.1320 1.1430 AUD/USD 0.7327 0.7160 0.7470 0.7270 0.7370 Source: Bloomberg, AmBank