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7 Mar 2014
Asia EM Express: Malaysia's central bank leaves policy unchanged, as expected
FXStreet (Łódź) - Bank Negara Malaysia released its monetary policy statement yesterday in which it announced the decision to keep rates steady at 3% in March, as widely expected. Small changes to the policy stance were made, including a closer observation of underlying inflation pressures and other destabilizing risks of financial imbalances and a more positive outlook on GDP growth.
According to the Nomura team of Asia Research analysts: Overall, the subtle nature of these changes probably signals that BNM is unlikely to take policy action in the next few meetings. However, with BNM signaling risks to underlying inflation, getting more upbeat on the growth outlook, and re-emphasizing the need to monitor financial stability risks, rate hikes remain likely this year. We therefore reiterate our forecast BNM will hike in H2 by a total 50bp.
Also on Thursday the IMF released an report on Mongolia in which it emphasizes that the Tugrik is moderately overvalued, even though it had already weakened by 16% last year, and urged the country to step uf reforms saying that “putting the economy on a sustainable path requires implementation of a package of fiscal and monetary adjustment in the context of a flexible exchange rate regime.”
Tim Condon from ING comments: “Mongolia’s 'unsustainable' policies are sustainable if Oyu Tolgoi Phase II gets going, which depends on Rio Tinto, the majority shareholder, signing an investment agreement with the government. Visibility into the bogged down negotiations is low. A recent hopeful sign, a press report that one of Rio’s engineering contractors is hiring workers for a copper mine project in the Gobi desert, has not been reflected in asset price movements.”
Meanwhile, it was reported that the People’s Bank of China set today's yuan reference rate at 6.1201, highest since January 24.
Economic data
Malaysia's merchandise exports data, released yesterday by the Department of Statistics surprised to the upside growing by 12.2% year-over-year to MYR63.97 billion in January. Forecasts pointed to only 7.9% growth. Imports jumped 7.2% to MYR57.62 billion, compared to expectations of a 2.6% drop.
Thai consumer confidence deteriorated in February, falling for the eleventh running month to 69.9 from 71.5 in January, the Thai Chamber of Commerce reported on Thursday.
Technicals
This might be the best week for Asian currencies since September 2012, as the recent weakening of the US economic recovery raises expectations that the US Federal Reserve will slow down the pace of reductions in its QE program. The easing of concerns over a possible Russian military intervention in Ukraine also benefited Asian currencies.
IDR rose 1.7% to 11,415 against the dollar. INR advanced 1.2% to 61.03, THB climbed 0.9% to 32.278, the MYR grew 0.6% to 3.2564, while the CNY gained 0.51 to 6.1140.
The KRW, PHP and the TWD also strengthened.
According to the Nomura team of Asia Research analysts: Overall, the subtle nature of these changes probably signals that BNM is unlikely to take policy action in the next few meetings. However, with BNM signaling risks to underlying inflation, getting more upbeat on the growth outlook, and re-emphasizing the need to monitor financial stability risks, rate hikes remain likely this year. We therefore reiterate our forecast BNM will hike in H2 by a total 50bp.
Also on Thursday the IMF released an report on Mongolia in which it emphasizes that the Tugrik is moderately overvalued, even though it had already weakened by 16% last year, and urged the country to step uf reforms saying that “putting the economy on a sustainable path requires implementation of a package of fiscal and monetary adjustment in the context of a flexible exchange rate regime.”
Tim Condon from ING comments: “Mongolia’s 'unsustainable' policies are sustainable if Oyu Tolgoi Phase II gets going, which depends on Rio Tinto, the majority shareholder, signing an investment agreement with the government. Visibility into the bogged down negotiations is low. A recent hopeful sign, a press report that one of Rio’s engineering contractors is hiring workers for a copper mine project in the Gobi desert, has not been reflected in asset price movements.”
Meanwhile, it was reported that the People’s Bank of China set today's yuan reference rate at 6.1201, highest since January 24.
Economic data
Malaysia's merchandise exports data, released yesterday by the Department of Statistics surprised to the upside growing by 12.2% year-over-year to MYR63.97 billion in January. Forecasts pointed to only 7.9% growth. Imports jumped 7.2% to MYR57.62 billion, compared to expectations of a 2.6% drop.
Thai consumer confidence deteriorated in February, falling for the eleventh running month to 69.9 from 71.5 in January, the Thai Chamber of Commerce reported on Thursday.
Technicals
This might be the best week for Asian currencies since September 2012, as the recent weakening of the US economic recovery raises expectations that the US Federal Reserve will slow down the pace of reductions in its QE program. The easing of concerns over a possible Russian military intervention in Ukraine also benefited Asian currencies.
IDR rose 1.7% to 11,415 against the dollar. INR advanced 1.2% to 61.03, THB climbed 0.9% to 32.278, the MYR grew 0.6% to 3.2564, while the CNY gained 0.51 to 6.1140.
The KRW, PHP and the TWD also strengthened.