MYR (4.347) ▼

▪ MYR slipped to its lowest level since March 2017 on market jitters over US-CN showdown, COVID-19 pandemic uncertainty, oil price volatility and domestic politics. In addition, ringgit was dragged further by weaker yuan, reflecting Malaysia’s reliance on China.

▪ Increasing confrontation risk between Washington and Beijing coupled with Malaysia’s potential political turmoil is expected to worsen the virus-hit economy, potentially pushing MYR nearer to 4.40 level in the 2Q20.

IDR (14,610) ▼

▪ IDR strengthened in May, supported by Bank Indonesia (BI) intervention in the spot market and bond purchasing in the secondary market as well as BI decision to hold policy rates steady at 4.50% amid weak GDP growth (1Q20: 3.0%; 4Q19: 5.0%).

▪ Renewed US-CN trade and political tussle as well as looming risks of a potential second wave infections could exert downward pressure on IDR going forward.

THB (31.812) ▲

▪ THB strengthened to below 32.0 for the first time since March 13th, as the gradual economic reopening and the release of better-than-expected economic data (i.e. 1Q20 GDP, exports) outweighed depreciatory pressure arising from the 25bps policy rate cut.

▪ THB to remain boosted in June on hopes for economic recovery, backed by expectations of further easing of movement restriction, in spite of the extension of the state of emergency until June 30th.

CNY (7.136) ▼

▪ CNY plunged to its weakest in over eight months on increasingly soured US-CN relation as the countries clashed over the COVID-19 pandemic, trade and China's national security law for Hong Kong. These offset support from the government and PBoC’s pledge for more fiscal and monetary easing.

▪ Weakness to prevail as the PBoC signalled its tolerance for depreciation, by setting the official yuan midpoint at the weakest level (7.1293) since 2008.

JPY (107.830) ▲

▪ JPY weakenedtoabove107levelon risk mode sentiment amid positive development of COVID-19 vaccine and easing lockdown in several countries. Meanwhile, the government announced second stimulus package, bringing the total worth JPY234 trillion or 40% of GDP, largest in the world.

▪ JPY is expected to strengthen this month, regaining its safehaven status on the back of rising geopolitical risks premium, in particular, the US-CN crisis, Hong Kong protest and the South China Sea dispute.

Source: Kenanga Research - 1 Jun 2020