Written by Steven Dooley and Shier Lee Lim
Aussie gains most on Powell comments
The greenback was weaker after Federal Reserve chair Jerome Powell signalled that the US central bank was likely to cut rates later this year.
“If the economy evolves broadly as expected, it will likely be appropriate to begin dialling back policy restraint at some point this year,” said Powell.
The Australian dollar gained the most on the back of Powell’s comments, up 0.9%.
The AUD/USD closed at the highest level since 1 February.
The NZD/USD was also stronger and gained 0.7%.
In Asia, the USD/SGD fell 0.3% while the USD/CNH was flat.
China trade balance due
Chinese trade balance is due around 10.00am HKT (1.00pm AEDT).
From 2.3% in December, we anticipate export growth (in USD) to fall to 0.4% y-o-y in January-February.
This is because certain tailwinds from the global IT boom are expected to be offset by a higher base. Because of the persistently low domestic demand for manufactured goods, import growth is expected to drop to -0.2% y-o-y in January and February from 0.2% in December. All things considered, this suggests that the goods trade surplus shrank from USD75.3 billion in December to USD53.4 billion in January–February.
We remain tactically positive on CNY.
Bank Negara due for MYR
As per BNM’s growth and inflation projections, we anticipate that the policy rate will continue at 3%, and the policy statement will retain its current tone and assessment that the monetary stance is still supportive to the economy.
Despite lower-than-expected Q4 GDP and January CPI inflation numbers, the tech upcycle is improving the economic picture. Regarding inflation, BNM still sees some slight upside risks as a result of the government’s intentions to rationalize subsidies later this year.
We also anticipate BNM to keep to its position that the recent FX weakening is mostly the result of external causes and that it will continue to preserve the orderly operation of the FX markets in light of strong domestic fundamentals. This would indicate that BNM is committed to maintaining the traditional method of FX intervention.
Authorities are stepping up their interactions with government-linked companies in an effort to stimulate inflows, as a result of the ringgit fall. However, it occurs against a backdrop of citizens withdrawing money from their portfolios and direct investment income outflows that consistently deplete the BoP.
Aussie jumps after Powell
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 March
All times AEDT
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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