MYR (4.020) ▲

▪ MYR hits its highest level since June 2018 on the final day of 2020, as Brent crude oil price trade higher in December (Average USD50.2/bbl; Nov: USD44.0/bbl), mainly due to COVID-19 vaccine optimism and a weaker dollar dynamic.

▪ A further MYR appreciation is expected in January amid the anticipated persistence of the weak USD due to the Fed’s ultra-low interest rates and the prospects of a global economic recovery. In addition, the tabling of the 12th Malaysian plan is seen to provide additional support to the local note.

IDR (14,050) ▲

▪ IDR closed slightly higher in the final month of 2020 on the back of weakening USD, mainly due to the positive global sentiment, particularly the release of the US fiscal stimulus and optimism about the Brexit agreement.

▪ IDR may continue to rally in January 2021, bolster by vaccine rollout optimism. Nonetheless, concerns over another rate cut by Bank Indonesia should IDR continue to rally, and fears about the new COVID-19 strain may limit the gain.

THB (29.939) ▲

▪ THB climbed further to its strongest level since 1st January 2020 on the signing of the US COVID-19 relief bill (USD900b) and expectations of less FX intervention by the BoT following the inclusion of THB in the US currency watch list. The strength was partly offset by a fresh wave of COVID-19 infections.

▪ THB is expected to remain on an uptrend amid sustained dollar weakness, progress in global COVID-19 vaccine rollout and extended fiscal measures. The upside would be limited by worries over tighter local pandemic curbs.

CNY (6.527) ▲

▪ CNY climbed to a 30-month high in December, before settling down slightly higher against the weakened dollar. CNY gains were supported by strong data amid a sustained economic recovery. However, China’s major state-owned banks were seen buying USD in an effort to stem the rapid rise of the local currency.

▪ CNY will likely sustain a controlled uptrend in January, on the back of a solid economic recovery, persistent dollar weakness, and further vaccine rollout.

JPY (103.140) ▲

▪ JPY edged up slightly against the USD in December, attributable to USD weakness as Trump's approval of a USD2.3t stimulus package and hopes for an expanded stimulus dragged the greenback lower. Surging COVID19 cases globally and confirmation of new virus strains further support the Yen.

▪ JPY may continue to strengthen against the USD on continued broad dollar weakness. However, narrowing interest-rate differential between the US and Japan may keep the pair at a tight range.

Source: Kenanga Research - 4 Jan 2021