CNY (6.340) ▼

• CNY depreciated against the USD in March, as a spike in COVID-19 cases led to lockdown measures in Shanghai and as the People’s Bank of China vowed to maintain accommodative monetary policy. The yuan had initially maintained its recent strength early in the month, following China’s announcement of an optimistic 5.5% GDP growth target for 2022.
• CNY may continue to weaken this month as China’s economy is weighed by a worsening COVID-19 outbreak and potentially more restrictive containment measures.

JPY (121.670) ▼

• JPY plunged to a 7-year low against the USD in March, primarily due to greater monetary policy divergence between the dovish Bank of Japan (BoJ) and the hawkish US Fed. In an effort to defend its 0.25% yield cap, the BoJ moved to contain rising government bond yields, even as US Treasury yields soared to its highest level in years.
• JPY may continue to weaken in April as the BoJ commits to accommodative monetary policy and maintains its efforts to keep government bond yields low, even as other major central banks continue to tighten. However, there is a risk that the Japan’s government may intervene to support the yen if the depreciation worsens significantly.

MYR (4.204) ▲

• MYR depreciated against the USD for the third consecutive month in March, breaching the 4.20 threshold, despite higher Brent crude oil price, improving macroeconomic indicators and Malaysia border reopening news. The weakness was attributable to heightened geopolitical uncertainty and narrowing MY-US bond yield differentials.
• The direction of the local note for this month will be heavily influenced by the development of the Russia-Ukraine war and US economic reports. Domestically, the reopening of the international borders may help to buoy the ringgit around the 4.19-4.20 handle.

IDR (14,363) ▲

• IDR appreciated marginally against the USD, primarily supported by elevated commodity prices brought by the Russia-Ukraine crisis. The reopening borders optimism and further easing of the COVID-19 pandemic restrictions as Indonesia set to boost its tourism activity further lifted the IDR. Nonetheless, the upside bias was capped by the hawkish US Fed and concern over China's lockdown.
• IDR is expected to appreciate marginally in April as the risk currency is set to benefit from the elevated commodity prices. It will also find support from the positive sentiment as the economy reopens. However, the Fed tightening cycle may limit the upside for the rupiah.

THB (33.270) ▲

• THB depreciated in March due to surging COVID-19 cases, raising concern that the country will delay its loosening of travel restrictions and pressure on its economic recovery. In addition, the US Fed hawkish tightening cycle and ongoing Russia-Ukraine crisis also weighed on the THB.
• THB may reverse its downtrend slightly in April with further economic reopening optimism, while COVID-19 cases are expected to peak and subside. Nevertheless, the upside would likely be limited due to global geopolitical tension and the US Fed's hawkish tilt.

Source: Kenanga Research - 1 Apr 2022