▪ MYR rallied to a five-month high against a weakening USD due to the increase in US COVID-19 cases and escalating Sino-US tensions. The Fed’s recent dovish statement coupled with signs of Malaysia’s economic recovery have helped to further support the local note.
▪ MYR is expected to marginally appreciate against the USD in August on the back of underlying USD weakness due to the uptick in US unemployment claims and record 32.9% collapse in its 2Q20 GDP. However, MYR upside may be partially capped by uncertainties surrounding local COVID-19 cases, dwindling oil demand and decaying US-China ties.
▪ IDR depreciated in July as Bank Indonesia (BI) cut interest rates to 4.0%, the lowest level since the benchmark rate system was adopted in 2016. The central bank signalled more room to cut and pledged bond-buying programs to finance virus-recovery spending amid surging COVID-19 cases domestically.
▪ IDR is expected to face another month of losses asBI priority shifted towards supporting growth recovery with the possibility of another 25bps cut.
▪ THB weakened on elevated political and policy uncertainty following the resignation of six key ministers, the announcement of a cabinet reshuffle by August and mounting anti-government protests. These outweighed support from favourable vaccine headlines.
▪ THB to trade higher as dollar’s safe haven status is expected to remain pressured by surging COVID-19 cases, offsetting downward bias from the domestic political instability.
▪ CNY strengthened on upbeat economic data (e.g. 2Q20 GDP, trade, PMI), vaccine progress and a battered dollar. The rise was however trimmed by worsening US-CN relation, marked by tit-for-tat closures of consulates.
▪ A sustained bullish trend is expected this month underpinned by dollar weakness amid surging COVID-19 cases and by relative-strength of China’s economic recovery.
▪ JPY rallied against USD in July on dismal US data, dovish US Fed, virus resurgence and escalating US-CN tensions. Meanwhile, the Japanese government recently warned against the rapid rise in Yen, as its underscored authorities aim to boost exports.
▪ JPY could gain further on the back of dovish US Fed and fears of virus resurgence, reaffirming its safe-haven currency status amid USD weakness.
Source: Kenanga Research - 3 Aug 2020
Created by kiasutrader | Aug 26, 2024