FW: RHB FIC Rates & FX Market Update - 10/10/2017

 

 

10 October 2017

 

 

Rates & FX Market Update

 

 

Expect Yuan Stability Ahead of the CPC

 

Highlights

 

¨    Global Markets: Upward USD momentum hit a roadblock overnight (-0.13%) over speculations of another North Korea missile test. Gold was higher overnight as well, although the USDJPY pair remained flat ahead of the snap poll later this month, and as the official campaign starts today; we eye a two-third majority to be retained by the ruling parties as threshold to move JPY in the coming days. Globally, we remain neutral on the USD over the medium term, given our view that the Fed’s hawkishness is unlikely to persist with amassing uncertainties, alongside US political developments that could once again disappoint markets.

¨    AxJ Markets: Chinese Caixin services PMI fell to 50.6 in September (Aug: 52.7), and the worst reading since end-2015, amid a cooling-off in the pace of new orders. While overnight USDCNY fixing was higher than pre-holiday levels, it is still lower than expectations, reflecting authorities’ determination to maintain macroeconomic stability ahead of the CPC later this month. Higher foreign reserves level in September (USD3.11trn; consensus: 3.10trn) also bolstered sentiment, with USDCNY and USDCNH declining c.0.4% and c.0.5% respectively; we maintain a neutral CNY stance.

¨    The USDIDR pair was unchanged overnight, staying above the 13,500 handle, amid no major DM or regional developments. The pair is likely to stay near 13,500 over the immediate term, with investors likely to assess the likelihood of another rate cut over 4Q17; 3Q17 GDP print due early-November will be key to watch in our view. We retain our neutral IDR stance for now, and eye 13,600 as the next resistance for the pair.

 

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