24 Apr 2014
Asia EM Express: Thai central bank on hold in April on continuing civil unrest
FXStreet (Łodź) - The Thai central bank held its monetary policy meeting on Wednesday and decided to keep the one-day bond repurchase rate at 2%, after cutting it by 25bp in March. The monetary policy committee members voted 6-1 in favor of staying put, with one dissenter suggesting another 25bp reduction.
According to the official statement released after the decision was communicated, the Bank of Thailand suggested that the continuing political deadlock in the country was affecting private investment and tourism, which could negatively weigh on Q1 growth.
In the opinion of Bill Hubard, Chief Economist at Markets.com “the BoT has come to the end of its current rate cut cycle, and will hold rates ‘steady’ for an extended period, unless growth differs significantly from current expectations. The BoT noted that financial conditions are already accommodative, and ‘appropriately supportive’ of an economic recovery.”
Economic data
On Wednesday South Korea informed that on a quarterly basis GDP grew by 0.9%, between January and March, unchanged from the previous quarter and slightly above consensus of +0.8%. Year-on-year GDP growth accelerated to 3.9% from 3.7%, above expectations of a 3.8% rise.
Tim Condon from ING comments: “2Q GDP growth has to fall well short of 1Q’s 3.9% for the BoK to downgrade its 3.9% 1H14 forecast. We think a growth shortfall beyond 2Q would be less likely to trigger increased accommodation because the Fed’s lift-off from the ZLB will loom larger.”
Also on Wednesday the Ministry of Economic Affairs Taiwan released annual Industrial Production data which showed a 3.05% increase, in March considerably down from the 6.83% rise in February but above projections of +1.3%.
On Thursday the Conference Board LEI for China said that the country's CB Leading Economic Index increased to 1.2% in March from 0.9% in February
Technicals
Jonathan Cavenagh, Currency Strategist at Westpac Institutional Bank offers some views on future USD/Asia currency moves. He notes that the market has turned its focus from selling USD/Asia rallies to buying dips, which he believes was prompted by a rise in US yields as US data improves and a renewed upward USD/CNY tend.
“USD/CNY/CNH should be well supported on dips, although we don't expect to see a dramatic surge higher in either pair, unless we see a surge through the 6.2500 level, which could bring structured product stop losses into play and accentuate USD strength.”
“KRW has proven to be very resilient to the fresh round of CNY weakness, which leaves us quite wary of being short 1 month USD/KRW at these levels. Still KRW should fare better than TWD, as the flow and equity market back drop looks less mature in Korea.”
“For 1 month USD/INR we would expect dips back to the 61.15/20 region to be well supported.”
“For 1 month USD/IDR we see risks of further upside pressure, as offshore bond investors look to hedge their onshore bond holdings.”
“MYR will be particularly sensitive to movements in US yields, although more concerted selling interest will emerge on any moves above the 3.30 level in terms of the 1 month NDF.”
“USD/PHP is in a similar position but likewise will see selling interest materialize on moves above the 45.00 level. SGD is neither cheap nor expensive at current levels but has scope to outperform against a potential back drop of rising USD yields and a weaker CNY trend.”
According to the official statement released after the decision was communicated, the Bank of Thailand suggested that the continuing political deadlock in the country was affecting private investment and tourism, which could negatively weigh on Q1 growth.
In the opinion of Bill Hubard, Chief Economist at Markets.com “the BoT has come to the end of its current rate cut cycle, and will hold rates ‘steady’ for an extended period, unless growth differs significantly from current expectations. The BoT noted that financial conditions are already accommodative, and ‘appropriately supportive’ of an economic recovery.”
Economic data
On Wednesday South Korea informed that on a quarterly basis GDP grew by 0.9%, between January and March, unchanged from the previous quarter and slightly above consensus of +0.8%. Year-on-year GDP growth accelerated to 3.9% from 3.7%, above expectations of a 3.8% rise.
Tim Condon from ING comments: “2Q GDP growth has to fall well short of 1Q’s 3.9% for the BoK to downgrade its 3.9% 1H14 forecast. We think a growth shortfall beyond 2Q would be less likely to trigger increased accommodation because the Fed’s lift-off from the ZLB will loom larger.”
Also on Wednesday the Ministry of Economic Affairs Taiwan released annual Industrial Production data which showed a 3.05% increase, in March considerably down from the 6.83% rise in February but above projections of +1.3%.
On Thursday the Conference Board LEI for China said that the country's CB Leading Economic Index increased to 1.2% in March from 0.9% in February
Technicals
Jonathan Cavenagh, Currency Strategist at Westpac Institutional Bank offers some views on future USD/Asia currency moves. He notes that the market has turned its focus from selling USD/Asia rallies to buying dips, which he believes was prompted by a rise in US yields as US data improves and a renewed upward USD/CNY tend.
“USD/CNY/CNH should be well supported on dips, although we don't expect to see a dramatic surge higher in either pair, unless we see a surge through the 6.2500 level, which could bring structured product stop losses into play and accentuate USD strength.”
“KRW has proven to be very resilient to the fresh round of CNY weakness, which leaves us quite wary of being short 1 month USD/KRW at these levels. Still KRW should fare better than TWD, as the flow and equity market back drop looks less mature in Korea.”
“For 1 month USD/INR we would expect dips back to the 61.15/20 region to be well supported.”
“For 1 month USD/IDR we see risks of further upside pressure, as offshore bond investors look to hedge their onshore bond holdings.”
“MYR will be particularly sensitive to movements in US yields, although more concerted selling interest will emerge on any moves above the 3.30 level in terms of the 1 month NDF.”
“USD/PHP is in a similar position but likewise will see selling interest materialize on moves above the 45.00 level. SGD is neither cheap nor expensive at current levels but has scope to outperform against a potential back drop of rising USD yields and a weaker CNY trend.”