INSIDE ASIA: MYR Declines on Payment Defaults; Yuan Fixed Higher
(Bloomberg) -- Ringgit drops on news that 1MDB defaulted on its bonds, sending Malaysian credit-default swaps higher. Chinese central bank lifts yuan fixing by most since March 18 following a decline in Dollar Index overnight. Rest of Asian currencies were mostly subdued.
- Malaysia ringgit drops for a fourth session, after 1Malaysia Development Bhd. said it didn’t pay $50 million of interest on a $1.75 billion bond amid a dispute with Abu Dhabi’s sovereign wealth fund on who should be making the payment
- Ringgit reacting in knee jerk fashion, though people may still need time to understand the issue; default is typically the last resort, Moh Siong Sim, FX strategist at Bank of Singapore says in interview
- There is contingent liability on the government as well as rating risk, Nizam Idris, head of strategy for fixed income and currencies at Macquarie Bank, says
- Chinese yuan steady after PBOC raised its reference rate by most in five weeks
- Higher reference rate is likely aimed at signaling central bank’s “neutral bias” to markets instead of defending the yuan index, says Ken Cheung, Asian FX strategist at Mizuho Bank
- Yuan’s decline may set off easing by Asian central banks, analysts say
- Regulators are discussing a possible reduction in provisions that banks must set aside for bad loans, chairman of China Construction Bank said on April 25
- PBOC conducts 101b yuan of 3-mos. MLF operations at 2.75% and 166b yuan of 6-mos. MLF at 2.85% today, PBOC says on microblog
- Korean won falls for third day after data showed preliminary 1Q GDP rose 2.7% y/y, matching median est. and the slowest pace since 2Q 2015
- Korea to increase capital of KDB, Kexim for corporate restructuring
- Yen gains for second day, after rising 0.53% yesterday
- Finance Minister Aso says he expects BOJ to make efforts to achieve price goal; not considering extra budget now except for quake relief
- USD/JPY could trade in 110-112 range with slight weak yen bias based on higher expectations for BOJ’s easing this week, says Yujiro Goto, London-based senior FX strategist at Nomura International in an interview
- Comparison between 1-mo. USD/JPY implied volatility option smile today with a similar period prior to BOJ’s meeting in Jan. suggests investors are a lot more prepared for central bank easing now than in the first month of 2016
- Morgan Stanley expects “full-scale 3-dimensional easing” of quantity, quality and interest rates, according to April 25 note
- Kiwi leads gains among major peers, climbing 0.48% after dollar dropped overnight
- RBC is long NZD/USD into Thursday’s RBNZ official cash rate decision, citing probability that a rate cut will come only in June, according to note dated April 25
- RBNZ should keep official cash rate on hold Thursday, shadow board says in e-mailed statement from New Zealand Institute of Economic Research
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
Tickers 0206021D MK (1Malaysia Development Bhd)
People Ken Cheung (Mizuho Financial Group Inc)
Moh Sim (ING Groep NV)
Nizam Idris (Macquarie Group Ltd)
Yujiro Goto (Nomura Holdings Inc)
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