MYR (4.239) ▲

▪ 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 (14,600) ▼

▪ 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 (31.260) ▲

▪ 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 (6.975) ▲

▪ 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 (105.83) ▲

▪ 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