MYR (4.164) ▲

▪ MYR registered its third straight month of gains on rising Brent crude oil price (Aug: USD45.0/barrel; Jul: USD43.2/barrel) due to a larger-than-expected US inventory draw. In addition, ringgit had strengthened against a falling USD after the Fed announced a major monetary policy shift.

▪ MYR is expected to maintain its upside momentum on increasing ringgit demand as the Fed sets the stage for a prolonged period of lower rates. However, BNM interest rate decision on September 10th coupled with local political uncertainty may reverse the trend.

IDR (14,563) ▲

▪ IDR strengthened in August, supported by Bank Indonesia's (BI) decision to keep its 7-day reverse repo rate unchanged at 4.00% and its Governor upbeat tone on near term economic outlook, offsetting weaker 2Q20 GDP growth and declining import numbers earlier.

▪ IDR is expected to gain further on dollar weakness, but the upside would be capped by the quantitative easing program embark by BI.

THB (31.138) ▲

▪ THB gained on expansion of stimulus for domestic tourism and a less-dovish tilt by the BoT, offsetting pressure from the Fed’s gloomy statement on growth prospect and an elevated political instability marked by a wave of student-led protests.

▪ THB to sustain a bullish trend amid continued dollar weakness, as the Fed tilted further towards lower-for longer interest rates. However, the upside would be partially capped by the ongoing political unrest.

CNY (6.847) ▲

▪ CNY continued its rally in August, on the back of positive industrial production data (Jul: 4.8%) and better-thanexpected exports performance (Jul: 7.8%). Strenuous political tensions with the US, and an uncertain US-China trade deal, have so far been outweighed by the strengthening of China’s economic recovery.

▪ CNY is expected to gain further against the USD amid improving growth recovery and a persistently weak dollar. However, some downside risk remains owing to the threat of an escalating US-China tech war.

JPY (105.850) ▼

▪ JPY depreciated slightly against the USD in August, inching back closer to 106 on upbeat Chinese PMI, which signalled encouraging signs, supporting the 'risk-on' environment and erasing the gain recorded earlier after the announcement of Prime Minister Shinzo Abe resignation and the US Fed new policy stance.

▪ JPY is expected to be pressured in September amid positive news on the progress of a COVID-19 vaccine and uncertainty of Abe succession.

Source: Kenanga Research - 1 Sept 2020