THE US dollar was steady to easing bias with a toggle of risk sentiment and the bulk of market actions were reflected through the euro with hopes that some of the world’s biggest central banks would resort to stronger monetary policies to support global economy.
As such, high-yielding currencies like the kiwi dollar, home to the developed world’s top yield, and the Aussie, which ranks second outperformed. The euro appreciated against the US dollar amid rising uncertainties over US interest rate hikes and supported by the constructive eurozone economy data flows.
Eurozone economic growth for the second quarter was revised upwardly to 0.4% from a preliminary reading of 0.3%, underpinned by healthy household consumption. Elsewhere, Germany’s exports and imports hit record highs in value terms in July suggesting that foreign appetite for goods from Europe’s largest economy remained robust despite a slowdown in China.
The yen fell 1.25% against US dollar, reversing its weekly gains position of last week. Key drivers were weakening macroeconomic data and the heavy flooding in eastern Japan. The revised gross-domestic-product figure showed that Japan was still in contraction and the business spending has declined further from the preliminary reading. This was echoed by the core machine orders in Japan that skidded 3.6% in July, as firms reined in big-ticket spending.
Tropical storm Etau sent raging floodwaters into a neighbourhood north of Tokyo and flooded thousands of buildings, with more than 170,000 people have been evacuated. On top of that, an influential ruling Liberal Democratic Party lawmaker Kozo Yamamoto triggered a gap higher to highs of 21.3 from 120.3 after calling for further monetary easing.
Asian currencies ended the week with a positive bias against the US dollar. Leading the gain were the won, followed by the Singapore dollar and the Taiwanese dollar. The strengthening of these currency pairs was on the back of equity-related inflow, as Shanghai Composite index that rose by 3.9% during the week provided a more constructive environment for risk appetite.
The contraction in Korea unemployment rate and the slower pace of decrease in Taiwan’s inflation rate also helped support the strengthening of both the won and the Taiwanese dollar.
The ringgit gained 0.14% against the US dollar, ignoring the cross Singapore dollar/ringgit that still stayed above the psychological handle of 3.00. The ringgit was riding on the buying support by local funds of local equities that rebounded to stay above the 1,600 level, the three-month crude palm oil future price rally following the announcement of price stabilisation measures, the drop in one-month ringgit NDF rate and stronger-than-expected- industrial production due to positive growth in manufacturing and mining. It grew 6.1% against markets expectation of 5%. Strong rally in Chinese equities also provided good backdrop to market optimism across global markets.
Ten-year US yield hit a high of 2.25% from a low of 2.12% in response to higher oil prices and US stock which reduced the demand for safe haven bonds. At Friday’s 11.00am pricing, the two, five and 10-year UST traded at 0.73%, 1.54% and 2.22%.
M’sian bond market
Trading activities in local govvies were lighter this week as most players are adopting a wait-and-see strategy ahead of Bank Negara and US Fedaral Open Market Committee meetings. Local govvies saw RM6.1bil trading volume, translating into a daily average of RM1.5bil. This was lower compared with the preceding week’s total trading value of RM15bil or an equivalent of RM3.7bil daily. At Friday’s 11.00am pricing, the three-, five-, seven-, 10-, 15-, 20- and 30-year benchmark Malaysian Government Securities yields settled at a respective 3.47%, 3.88%, 4.12%, 4.2%, 4.61%, 4.73% and 4.9%.
In the secondary private debt securities market, we saw a lower volume in trading activities this week, compared with last week. Total trading volume for the week stood RM900mil, averaging at RM223mil daily, compared with last week’s RM369mil. About 60% of the trading volume was contributed by the GG/A segment, 37% by the AA segment, with the remaining by the A segment.
In the GG/A segment, 2022-2034 tranches Danalnfra Nasional Bhd bonds traded mixed to close at the range of 4.45% to 4.9% with a collective trading volume of RM65mil. Meanwhile, 2016-2020 tranches Pengurusan Air SPV Bhd traded at mixed to close at 3.6% to 4.27% with RM55mil done. The A-rated Danga Capital Bhd ‘04/20 saw yield increasing 22-basis point to settle at 4.33% with RM25mil changed hands.
Trading activities in the segment this week were lower, compared with the preceding week. Sarawak Energy Bhd ‘06/18 and ‘07/29 traded mixed to close at 4.36% and 5.03% with a collective trading volume of RM40mil.
OCBC Bank (M) Bhd ‘11/15 saw yield increasing 3 basis points to close at 4.21% with a trading volume of RM50mil. Prominic Bhd ‘05/16 remained unchanged to close at 4.35% with a total trading volume of RM30mil.
Ringgit IRS market
The interest rate swap (IRS) curve shifted upwards across the curve following a stronger US job report and stronger-than-expected Malaysia’s industrial production. The three-month KLIBOR kept unchanged at 3.73% this week.
For enquiries, contact:
Did you find this article insightful?