CNY (6.461) ▼

▪ CNY closed last month unchanged against the USD, primarily due to mixed market sentiment and China's economic growth concerns. In addition, the yuan has been pressured by market expectations of policy divergence between the PBOC and the Fed.

▪ CNY may likely weaken against the greenback in September, on the back of an unstable and uneven domestic economic recovery and Fed's expected tapering mode by end of the year.

JPY (109.940) ▼

▪ JPY weakened against the USD in August, as the dollar monopolised safe-haven demand amid rising Delta variant cases across the globe. However, the yen rallied towards the end of the month below the 110.0 level, on the back of a pressured dollar.

▪ JPY will likely weaken this month, as it continues to register the effects of prolonged restrictions measures, due to the pandemic. Japan’s industrial production recently recorded a decline in July (-1.5% MoM; Jun: 6.5%) after rebounding the previous month, underlining the renewed impact of lockdown measures.

MYR (4.155) ▼

▪ MYR rallied on August 30 and erased almost all of July's losses, probably due to improving domestic political sentiment and weakening USD amid Powell's dovish tilt. The local note closed over 1.5% higher in August despite Malaysia's unabated spread of COVID-19 infections and lower average Brent crude oil price of USD70.5/barrel (July: USD74.3/barrel).

▪ MYR is expected to reverse its uptrend this month if the Fed turn hawkish at the September FOMC meeting and if the Brent crude oil price continue to fall amid demand fears. However, an expected loosening of more COVID- 19 restriction measures may cap the ringgit’s downside.

IDR (14,268) ▼

▪ IDR appreciated slightly in August, as sentiment improved amid dovish US Fed. The rupiah was also supported by Bank Indonesia's Governor comments on risk of inflation in 2022 which could hint a prospect of rate hike in the future. Nonetheless, the upside bias was capped by the worsening COVID-19 cases globally brought by the spread of the Delta variant.

▪ IDR may weaken in September if global COVID-19 cases continue to rise. However, an expected declining COVID- 19 cases and rising vaccination rate as Indonesia targets 50.0m doses monthly from September may limit the downside risk.

THB (32.257) ▼

▪ THB strengthened in the final week of August to appreciate against the USD. The baht appeared to be lifted by higher-than-expected 2Q21 GDP growth of 7.5% (1Q21: -2.6%), fund inflows redirected from China, and a weakening USD following the Jackson Hole symposium.

▪ THB may yet depreciate in September, weighed by persistent concerns regarding COVID-19 and renewed anti-government protests. Nevertheless, COVID-19 cases have been on a downtrend, resulting in some lockdown measures being eased.

Source: Kenanga Research - 1 Sept 2021