INSIDE ASIA: Yuan Heads for First Weekly Gain in Seven; MYR Dips
(Bloomberg) -- Yuan halts six weeks of decline after the PBOC was seen as defending the currency with stronger fixings. Ringgit drops as the 1MDB-related probes expand.
- Yen little changed after surging 1% yesterday after BOJ Kuroda said there’s no need for helicopter money policy in a June interview broadcast July 21
- Stronger JPY and CNY are supportive for Asian currencies, says Roy Teo, FX strategist at ABN Amro. Consolidation is expected to continue before FOMC and BOJ meetings next week
- DXY gains for the fifth week, while 10-year Treasuries yield little changed at 1.5491%. Australia 10-year bond yield drops 4 bps to 1.888%
- Dollar has climbed since early June on rising odds of Fed hikes, Gao Qi, FX strategist at Scotiabank, writes in note
- “As the Fed is less likely to hike its benchmark interest rates before December, we expect the dollar to pare its recent gains and decline again versus EM Asian currencies in the coming weeks on account of continued portfolio inflows spurred by regional reflationary policies and accommodative external liquidity.”
- Yuan little changed at 6.6702 vs USD. PBOC has strengthened yuan fixing by 0.2% this week, the most in six weeks
- PBOC has clearly conveyed message that USD/CNY at 6.7 is going to be defended through strong fixings, Andy Ji, FX strategist at CBA says
- China has intervened to prevent further yuan devaluation, which is different from intervening to promote weaker rate, U.S. Treasury official said yesterday
- USD/CNH bids from banks and leveraged accounts appeared after CNY fixed stronger than some bank models had forecast, FX traders in North Asia say
- China hosts G20 finance ministers this weekend
- Both Aussie and Kiwi slide by more than 1% this week as market increases bets on rates cut by RBA and RBNZ, while Australian 3-year sovereign bond yield falls for fifth day
- Yen steady; BOJ policy meeting next week
- Japan stimulus package could be as large as 30t yen, Nikkei reports
- Downplaying helicopter money talk by Kuroda likely cools expectations for BOJ meeting next week and weighs on USD/JPY, says Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank
- Won heads for a weekly decline on higher expectations of a Fed rate hike in December
- China-related risks, including yuan devaluation, to be key factors affecting South Korean won in 2H, says Lee Sung Hee, managing director at JPMorgan’s Korea branch
- Southeast Asian currencies mixed, with ringgit declining while the baht gains
- Ringgit heads for its worst week since September on lower crude oil prices and the expanding 1MDB-related probes
- Swiss authorities seized Monet and Van Gogh works after the U.S. sent requests as part of probe into money-laundering and misappropriation involving 1MDB; follows on assets seized by U.S. and Singapore earlier in the week
- Oil prices have affected the ringgit and the latest developments on 1MDB may have “an impact on the political front, which we don’t know how it will work out and how serious it is,” said Irene Cheung, a FX strategist at ANZ
- Baht set for second weekly gain before debt auction
- Weekly FX reserves data due today; last +$179.2b
- Given global growth uncertainties, HSBC trims 2016 and 2017 Thailand GDP growth forecasts to 2.8%, according to July 21 note
- Expects BOT to lower rate by 25 bps to 1.25% at September meeting to help shore up confidence and ease baht appreciation
- IDR little changed after Bank Indonesia’s decision yesterday to leave rates unchanged
- While yesterday’s policy statement didn’t provide forward guidance for rate cuts, it’s clearly still in easing bias, based on BI executive director of monetary policy Agung’s comments: HSBC note yesterday
- Room for two more 25 bps rate cuts over 3Q and 4Q respectively: HSBC
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Andy Ji (Commonwealth Bank of Australia)
Irene Cheung (Australia & New Zealand Banking Group Ltd)
Qi Gao (Bank of Nova Scotia Asia Ltd/Singapore)
Roy Teo (ABN AMRO Group NV)
Yasuhiro Kaizaki (Sumitomo Mitsui Trust Holdings Inc)
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