FW: RHB FIC Rates & FX Market Update - 12/12/17

 

 

 

12 December 2017

 

 

Rates & FX Market Update

 

 

Markets Await FOMC Decision

 

Highlights

 

¨   Global Markets: The US Dollar was little changed after being temporarily shaken following an explosion in Manhattan on Monday (+0.05% d-o-d), as investors await the upcoming and last Fe's monetary policy decision of the year. The FOMC is widely expected to increase its benchmark interest rate by 25bps, a decision already largely priced in as the Dollar rebounded since September; focus will be on the justification of the policy action and the outlook for 2018. We remain neutral USD for now with the greenback expected to soften post-decision.

¨   AxJ Markets: Asian markets were also relatively quiet on Monday ahead of Fed's meeting which is a key driver for local markets. Despite a cumulative 75bps rate hike since December 2016, Asian currencies have strongly performed throughout 2017, with even no negative impact on exports. We remain broadly constructive on EM FX over the medium-term as fundamentals in the region have constantly improved while keeping in mind that risks associated to the Chinese deleveraging reforms remain the biggest fear.

¨   The Malaysian Ringgit was the best performing currency under our coverage (+0.27% d-o-d vs. USD) as the USDMYR pair reacted below the 4.10 resistance, concurrently to Brent making a two-year high just shy of the 65 mark on supply disruptions. The USDMYR pair is likely to remain in the 4.05/4.10 range this week as markets await Industrial production for the month of October due later today and the FOMC decision. We remain positive on the MYR over the medium-term against the backdrop of a strong economic momentum, improving sentiment, and policy recalibrations from the Central Bank alongside a weaker USD.

 

 

 

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