CNY (6.361) ▼

▪ Despite a more hawkish news from the Fed and a rate cut by the China’s central bank, the USDCNY pair still managed to trade below the 6.40 level due to a persistent seasonal corporate demand, resilient domestic trade data and a stronger official midpoint fixing by the PBOC.

▪ The yuan may continue to weaken against the USD this month as China is expected to maintain its zero-COVID-19 policy and as major central banks start to head towards policy normalisation. However, China’s strong foreign inflows may continue to buoy the Chinese currency.

JPY (115.480) ▼

▪ JPY depreciated slightly against the USD in January but found relative stability following heavy weakness in December. The yen remained pressured by the policy divergence between the Bank of Japan (BOJ) and the US Fed, as the Japanese central bank insisted that rates will not be raised in the near future.

▪ JPY may continue to weaken in February, as the US Fed marches towards a likely first rate-hike in March. The yen may also be weighed by extended lockdown measures in many regions, as Japan struggles to combat a surge in COVID-19 infections and hospitalisations.

MYR (4.186) ▲

▪ MYR erased most of its December 2021's gains against the USD despite improving domestic macroeconomic readings and higher average Brent crude oil price of USD85.6/barrel in January (Dec 21: USD74.8/barrel). The local note failed to outpace the strong USD uptrend amid growing expectations on Fed rate hikes.

▪ The ringgit is expected to chart a marginal appreciation against the USD in February amid expectations of a stronger 4Q21 GDP data reading and elevated Brent crude oil price. However, a possible spike in Malaysia new COVID-19 cases may put some pressure on the local note.

IDR (14,368) ▼

▪ In January, IDR depreciated against the USD as global sentiment turned risk-off amid Ukraine-Russia tussles and Sino-American tensions. The risk currency also was pressured by the Fed hawkish tilt and a surge in the number of COVID-19 cases domestically. Nonetheless, Bank Indonesia hints on the rate hike partially capped the downside bias.

▪ The performance of IDR in February would depend on risk catalysts such as the Ukraine-Russia tussle and the domestic COVID-19 development, which would likely pressure the local note in the short term.

THB (33.319) ▼

▪ THB closed slightly lower in January against the dollar as the US Fed turned more hawkish to tame inflation. Nonetheless, the downside bias was partially capped by the prospect of recovery as Thailand resumed quarantine-free tourism for vaccinated travellers from Feb 1 to boost its ailing economy.

▪ THB may find its support from the positive sentiment following the reopening of its borders though the growth recovery is likely to be impacted by the Omicron wave. In addition, the US Fed hawkish tone is expected to continue to weigh on the local note in the near term.

Source: Kenanga Research - 3 Feb 2022