THE G-3 currencies were mainly traded sideways after a steady flow of mixed news and global stock weaknesses.
The US dollar index was on mixed footing, alternating with trading session fate amid struggling sales of new single-family homes that fell 14.5% from February to a seasonally adjusted annual rate of 384,000 – the lowest annual rate since last July against bullish bias of US durable order, excluding volatile transportation category that climbed 2% – the biggest jump since January last year.
US jobless claims that increased by 24,000 to 329,000 in the week ended April 19 (305,000 in the week ended April 12), the most in a month and lower US 10-year treasury yield were the additional pressure points for a downward drift for the US dollar index to stay below 50-day moving average of 79.933 compared with 79.945 at start of the week. The US dollar index has stayed below 80 since April 8. Slowly but surely, it is coming to terms that the new Fed chairman Janet Yellen is dovish.
The euro also showed sign of lack of conviction and received low mileage from news of a surprise rise in German business confidence in April. The sign of a brightening mood in Europe’s biggest economy wasn’t evidently cheered by markets as investors appeared to be reluctant to test the resolve of the European Central Bank (ECB), which has warned of retaliatory action to tamp down on euro appreciation. ECB president Mario Draghi and his colleagues were not happy with the strong euro and weak inflation as the euro appreciation runs the risk of worsening the bloc’s inflation problem by lowering the cost of imported goods.
Benefiting from global stock weakness, geopolitical instability in Ukraine, another disappointing factory survey from China and a larger-than-expected monthly trade gap of 1.45 trillion yen in March (US$14.1bil) as export growth slowed to an increase of 1.8% in March; the yen flirting with two-week lows against the greenback but lighter trading conditions kept it confined to slender range of 102.28-102.63 respectively.
With an exception to the South Korean won that reeling from the GDP boost which raised rate hike expectations, rest of Asian currencies were operating under risk-off environment as on-going tension in Ukraine intensified. The Indonesian rpiah being the biggest loser against the US dollar fell 1.37% as foreign interest has turned lukewarm and the one-month NDF rate remained elevated at around 11646 for the review period compared with 11482 on Monday.
Following next was the 0.81% drop in the Indian rupee on falling Indian equities ahead of a holiday for polls in Mumbai and concern over weak monsoon rains that could fuel higher inflation as the odds of an El-Nino increase.
The ringgit (MYR) suffered 0.73% loss against the US dollar on lethargic bond market and as the one-month NDF rate stayed above 50-moving average of 3.2777 compared with 3.2568 on Monday while the cross the Singapore dollar-MYR edging above 2.600 as the dollar NEER traded 0.49% above the implied point of 1.2567. On the macro front, Malaysia reported stronger foreign reserves in the first half of April, attributable to the inflow of short-term funds. The reserves grew by 0.7% (US$900mil) from end-March to US$131.1bil in mid-April.
The Malaysian Institute of Economic Research’s Consumer Sentiments Index (CSI) rose 14.4 points to 96.8 in the first quarter (Q12014), after recording the lowest reading in almost five years of 82.4 in the final quarter of 2013 and its Business Conditions Index (BCI), which has been on the downtrend for two consecutive quarters, turned around to increase by 11.1 points to 103.1 in first quarter against 92.0 in 4Q2013.
Meanwhile, the Election Commission has set May 12 as nomination day and May 25 as polling day for the Bukit Gelugor by-election, following the death of incumbent Karpal Singh.
US Treasuries (UST) curve flattened, spurred by a slate of mixed macro data and corporate earnings results as well as the resurgent concerns around Russia/Ukraine territorial dispute. At the time of writing, the two-year yields rose 4bps to settle week-onweek at 0.44% while the five-year yields remain unchanged at 1.74%. The 10-year yields finished 4 bps lower at 2.68%.
M'sian bond market
Yields on local govvies traded sideways and closed mainly unchanged, continuing the trend for the past week with lack of market moving events to entice market interest. Moreover, the weakening of the MYR kept market players on the sidelines.
As of Thursday’s close, yields on three-, seven-, seven-, 10-, 15-, 20- and 30-year Malaysian Government Securities stood at a respective 3.4%, 3.58%, 3.94%, 4.09%, 4.43%, 4.62% and 4.9%. The week saw RM4.9bil worth of trades with a daily average trading volume of RM1.2bil compared with RM1.3bil previously.
On the local private debt securities market, secondary trading activity spiked with total trading volume at RM2.5bil for the week, averaging at RM614mil daily, compared with last week’s average of RM338mil. Trading volume for both the GG/AAA segment and AA segment generated equal contributions which stood at 50% each.
In the GG/AAA segment, buying interest was seen in both short and long tenure papers. In the short tenure papers, Cagamas bonds maturing 2014 had collectively garnered volume worth of RM108m. Into the long tenure space, GG-rated SPNB ‘03/19 traded unchanged at 4.03% with RM95m changing hands while a slew of AAA-rated N.U.R Power bonds maturing 2018-2020 saw total trading volume at RM105mil. Also, Danalnfra Nasional bonds maturing 2021-2022 saw RM80mil worth of trades reported done.
In the AA-segment, trading volume was largely contributed by the FI sector. Buying interest was largely seen in Hong Leong Bank bonds maturing 2014-2019 with yields eased 7-22 bps with RM121mil worth of trades done. Elsewhere, BGSM Management ‘12/16 traded 7bps lower at 4.38% with RM120mil changed hands while Weststar Capital ‘11/14 reported RM56mil trades done with yields remained unchanged at 4%.
MYR IRS market
In quiet trading, MYR interest rate swap (IRS) curve flattened following the movement of the UST curve.
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