MYR (4.157) ▼

▪ MYR seesawed between gains and losses against the USD in September and finally settled nearly unchanged compared to August’s closing level. The optimism over Malaysia additional fiscal stimulus and China’s continued recovery was overshadowed by domestic political turmoil and fears of rising COVID-19 cases.

▪ MYR is likely to trade weak in October on the back of worsening COVID-19 situation domestically and globally. In addition, rising political uncertainty and oil market volatility could add further downward pressure and might push the local note to trade above the 4.20 level.

IDR (14,880) ▼

▪ IDR depreciated in September, almost reaching the 15,000 mark, a level last seen in May 2020 due to weak inflation and poor retail sales. The government’s decision to reimpose a partial lockdown in Jakarta raises investors’ concerns about Indonesia’s economic recovery.

▪ IDR is expected to remain pressured on fears of COVID- 19 resurgence and risk-off mode. Nevertheless, the downside would be capped as Bank Indonesia is expected to hold rates steady at 4.00% for the rest of the year.

THB (31.653) ▼

▪ THB depreciated to its weakest level since July as investors’ confidence was wrecked by rising political risk marked by a sudden resignation of the newly-appointed Finance Minister and massive protests demanding monarchy and democratic reforms.

▪ THB to remain on a weakening trend as anti-government protests are expected to escalate following the parliament’s decision to delay a vote on a motion for constitutional amendment until November. This will offset support from the stimulus disbursement scheduled in the 4Q20.

CNY (6.791) ▲

▪ CNY rallied to its strongest level since May 2019 on a better-than-expected August economic data, China’s inclusion in the FTSE World Government Bond Index, and vaccine hopes. The appreciation was partially tempered by Trump’s remarks on US-CN decoupling.

▪ CNY to remain buoyed by favourable recovery prospect and the policymakers’ tolerance for appreciation following a development strategy shift towards bolstering the domestic market and reducing the cost of imports. Downside risk remains arising from the fraying US-CN relation.

JPY (105.700) ▲

▪ JPY appreciated against the USD, on the back of Yoshihide Suga’s appointment as the new Prime Minister of Japan. The yen’s rise was particularly bolstered by Mr. Suga’s declaration that he would continue his predecessor’s popular economic policies.

▪ JPY will likely strengthen against the dollar this month, but at a slower pace, as its six-month uptrend seems to be losing momentum. With global COVID recovery uncertain, the safe haven yen may also benefit from rising risk-off sentiment.

Source: Kenanga Research - 1 Oct 2020