CNY (6.475) ▲

▪ CNY strengthened against the USD in April, reaching a near 2-month high, on the back of robust domestic economic data with 1Q21 GDP growth registering a record 18.3% (4Q20: 6.5%). Additionally, the dollar was weighed by falling US Treasury (UST) yields and the US Fed’s persistent dovish outlook.

▪ CNY may continue to trade higher this month, amid China’s solid economic recovery and further USD weakness. Nevertheless, downside risks remain as USCN tensions show no signs of easing.

JPY (109.310) ▼

▪ JPY strengthened in April mainly due to weaker USD amid falling UST yields despite weak local economic indicators, slower vaccine rollout and rising domestic COVID-19 infections.

▪ JPY may depreciate this month, weigh by the Bank of Japan dovish stance amid a state of emergency and lockdown measures as COVID-19 cases continue to rise. Nonetheless, the decline in UST yields may limit the downside.

MYR (4.088) ▲

▪ MYR rose 1.38% in April, its first monthly gain of the year as the 10-year UST yield slipped to 1.63% from 1.74% in March, dragging the USD lower. Despite local COVID-19 surge, the ringgit still managed to appreciate, supported by the rise in Brent crude oil price and a more encouraging domestic economic data.

▪ MYR is expected to remain volatile and fluctuate in the range of 4.07-4.13 before closing the month slightly higher against the greenback, as USD's sell-off is expected to persist in May. A stronger-than-expected 1Q21 MY GDP reading and positive CN’s economic data could help to provide additional support for the ringgit.

IDR (14,445) ▲

▪ IDR inched up against the dollar in April as Bank Indonesia (BI) left the interest rate unchanged and further bolstered by the weak USD on the back of falling UST yields. However, the rupiah was pressured earlier due to concerns over the BI's independence.

▪ IDR is expected to extend its appreciation in May following the US Fed dovish stance and development in the US tax hikes. This would likely be supported by further improvement in the external sector amid wider global vaccine rollout.

THB (31.160) ▲

▪ THB appreciated marginally as the USD weakened amid a retreat in UST yields. However, the upside was limited by the emergence of a third wave of COVID-19 infections ahead of the Songkran holiday.

▪ THB may continue to strengthen against a bearish dollar trend as the Fed retains its dovish policy and Biden unveils his tax hikes proposal. These are expected to outweigh the impact from the tightened COVID-19 restrictions locally.

Source: Kenanga Research - 3 May 2021