Halister News

(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