nomura global fx wk 2012-04-12

Global Foreign Exchange Research

1

Global FX Weekly

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N O M U R A I N T E R N A T I O N A L P L C

1 2 A P R 2 0 1 2

Any authors named on this report are research analysts unless otherwise indicated.

Please see analyst certifications and important disclosures on starting on page 43.

Portfolio Performance

G10 FX 4

EM FX and Rates 5

Regional Articles

Sell USD/JPY volatility 7

The latest reversal of USD/JPY towards 80-81 has been exactly what we had expected, and we now believe USD/JPY will move sideways over the next couple of months. Our end-June forecast is 80. BOJ/MOF actions, Japanese investors‟ positions, and US rates are all supportive of this range trade scenario. Meanwhile, USD/JPY vol looks too high in historical context as well as relative sense when compared to other G10 currencies. Based on these fundamental/quantitative views, we‟d like to short USD/JPY vol.

USD/CNY: Empirical support for our short USD/CNY position 9

Based on our observation of fixings prior to previous major diplomatic events, fixings have tended to show an accelerated downward movement in the month prior to an event. The median length for such phases is around 27 calendar days, which is generally preceeded by a short phase of higher USD/CNY fixes. We see a similar pattern now in the fixings, which have started to fall since 6 April. Using the median length of 27 days for the phase of lower fixings takes us to 3 May, thus further confirming our view on the date of the upcoming S&ED meeting.

Adding to our short USD/CNY position 10

As discussed previously, we expect some CNY appreciation to commence in the second half of April ahead of the Strategic and Economic Dialogue. Although the exact date has not yet been announced, logic suggests that we add to our short USD/CNY recommendation (fixing on 4 May 2012). The date is logical given it would provide the Chinese with a little leeway after the Labour day holiday (30 April to 1 May) and also give the US side some space ahead of the G8 summit on 15 May.

Asia FX portfolio update: Enter long 1M SGD vs. a basket 11

Since we published our updated view on the upcoming Monetary Authority of Singapore‟s (MAS) monetary policy announcement, spot S$NEER has traded down from a 0.0% deviation from mid to -0.3% before settling at around -0.15% (16:00 SGT, 10 April). This was mainly driven by the worse-than-expected US job data released on 6 April. We think current level is attractive for us to enter a long SGD vs. a basket to position for SGD strength.

TRY 2v5 flatteners: Taking profits 12

We are taking profit because we see a higher probability of our bullish base case materialising for 2012 (in which case there are better ways to inevst than the curve trade) and a higher probability of a bigger sell-off if we are wrong. We arebanking 30bp, or USD150K.

Big move & take profit on ZAR 10yr vs. USD 10yr 14

Last week we recommended to pay ZAR 1mfwd10yr vs USD rates. The spread moved 20bp in our direction very quickly and while we think this trade should work going forwards, given USD/ZAR has spiked higher, we feel the next move would be the market speculating on the Fed implementing QE III should risk aversion continue further. That does not make paying ZAR vs USD a very efficient way to express a position, as last time this speculation occurred, ZAR rates outperfomed.

That time of the year again: REC ILS 5y 16

The recent noisy price action has provided some important signals for market themes. Firstly, the extreme pessimism surrounding rates, bonds and asset allocation is being re-questioned, the drive for safety and return 'off' the money remains the underlying theme, and real yields in strong balance sheet economies are falling once again. As an EM proxy to trade this theme, we are receiving ILS 3mfwd5y with medium confidence levels.

Simon Flint

[email protected]

Jens Nordvig

[email protected]

Geoffrey Kendrick

[email protected]

Craig Chan

[email protected]

Olgay Buyukkayali

[email protected]

Peter Attard Montalto

[email protected]

Saeed Amen

[email protected]

Tony Volpon

[email protected]

Boris Segura

[email protected]

Yunosuke Ikeda

[email protected]

Benito Berber

[email protected]

Ylva Cederholm

[email protected]

Yujiro Goto

[email protected]

Advin Pagtakhan

[email protected]

Martin Whetton

[email protected]

Charles St-Arnaud

[email protected]

Kewei Yang

[email protected]

Wee Choon Teo

[email protected]

Prateek Gupta

[email protected]

Prashant Pande

[email protected]

Masanari Takada

[email protected]

Vivek Rajpal

[email protected]

Global FX Weekly

12 Apr 2012 Nomura 2

Nomura 2 12 Apr 2012

Mexico: Election 101 18

We are cautiously optimistic about the results of the electoral process of July 1. In our view, the election should have no negative spillover effects on the market. However, in the unlikely scenario that the PRD‟s AMLO rises in the polls, we could see some weakness in asset prices, which we would fade because we believe a PRD government will not put macroeconomic stability at risk. Polls suggest the PRI‟s EPN will most likely be the next president of Mexico. If this indeed occurs, we would expect at least one of the structural reforms to be proposed and approved by congress. We think EPN would likely propose a fiscal reform that would increase non-oil revenues and foster greater participation of the market in the energy sector but within the current legal framework.

FX and Rates Model Output

Asia FX Positioning Indices 23

Asia Local Market Rate Expectations 26

Asia Local Market Rate Liquidity Monitor 35

Global FX Forecasts

FX Forecasts 44

Global FX Weekly




G10 FX Trading Portfolio

Key trading views

USD and CAD to outperform

EUR to underperform

Tactical views

Sell USD/JPY volatility

Portfolio risk summary

The portfolio has a negative correlation with USD.

The portfolio has a positive correlation with risk.

It has a positive correlation with USD yields and a positive correlation with EUR yields.

Exhibit 1. Portfolio deltas (spot and options) Exhibit 2. G10 risk sensitivity

-50-40-30-20-10

01020304050

US

D

EU

R

JP

Y

GB

P

AU

D

NZ

D

CA

D

CH

F

SE

K

NO

K

XA

UDeltas (mm USD)

-30

-20

-10

0

10

20

30

40

USD +1% S&P500 +1%

USD2Y +10bps

EUR2Y +10bps

$k move in portfolio

Source: Nomura Source: Nomura

Exhibit 2. G10 trading portfolio performance

G10 Macro Strategy Spot Portfolio

L/S Trade name Trade

Trade

Type

Entry /

Change

Date Exit Date

Entry

Level Current P&L (%)

Position

Size

($m)

Notional

($m)

Carry

(bps)

Var

($k)

P&L

($k)

weekly

P&L

($k)

entry

short EUR/JPY exit spot 02-Apr-12 10-Apr-12 109.50 106.33 2.9 15 15 -8 488 136 440

short USD/CAD exit spot 22-Mar-12 11-Apr-12 1.0000 1.0051 -0.5 20 20 -34 544 -246 -93

short EUR/NOK exit spot 21-Mar-12 12-Apr-12 7.6100 7.6204 -0.1 20 20 61 322 -124 -11

short EUR/MXN exit spot 26-Mar-12 10-Apr-12 16.854 17.208 -1.9 10 10 134 233 -237 -189

long EUR/CHF hold spot 30-Mar-12 1.204 1.203 -0.1 39 39 10 326 25 -37

Spot Weekly P&L (since 05-Apr-12) -446

Spot Total P&L year to date 1,707

1 US $100 million portfolio since Feb 5, 20092 EUR/JPY sl 111 tp 106 3 USD/CAD sl 1.005 tp 0.974 EUR/NOK sl 7.62 tp 7.45 5 EUR/MXN sl 17.20 tp 16.00 6 EUR/CHF sl 1.1990 tp 1.2400

G10 Macro Strategy Options Portfolio

L/S Trade name Trade

Trade

Type Entry Date

Exit / Expiry

Date

Entry

Level Current P&L (%)

Pos

Size

($m)

Notional

($m)

P&L

($k)

weekly

P&L

($k)

entry

short USD/JPY 78/83 enter Strangle 11-Apr-12 11-Jul-12 1.78% 1.65% 0.13% 0.330 20 26 26

long XAU/EUR 1300/1375 hold Call Spread 09-Jan-12 09-May-12 1.95% 0.54% -1.41% 0.027 5 12 -71

Options Weekly P&L (since 05-Apr-12) 38

Options Total P&L year to date -82

Source: Nomura

Global FX Weekly




EM FX and Rates Trading Portfolio

Exhibit 1. EM FX Portfolio

Trade

TypeEntry date

Expiry/

Exit date

Entry

level

Stop-

loss

Previous

Mark

Current

level

P&L

since

entry

VAR

(USD)

Size Notional $ % carry $

Asia

Enter Short USD / CNY NDF 12-Apr-12 08-May-12 6.3075 6.3075 6.3004 6.3075 20.0 20.0 22,513 0.1 22,513

Hold Short USD / CNY NDF 27-Feb-12 22-May-12 6.2990 6.3181 6.3039 6.2990 5.0 5.0 11,272 0.2 -3,850

Hold Short USD / CNY NDF 27-Feb-12 21-Jun-12 6.2965 6.3220 6.3102 6.2965 5.0 5.0 9,370 0.2 -10,839

Hold Short USD / HKD 2Y Fw d 06-Dec-10 10-Dec-12 7.7205 7.8363 7.7577 7.7570 7.7205 20.0 20.0 1,684 0.0 -94,553

Hold Long SGD / KRW 3M 27-Jan-12 30-Apr-12 898.9 880.9 898.1 909.2 898.9 5.0 5.0 61,874 1.2 57,202

Hold Short USD / IDR 1Y NDF 01-Mar-12 05-Mar-13 9490 9632 9500 9498 9490 5.0 5.0 1,212 0.0 -3,952

Hold Long3m put

spread16-Mar-12 18-Jun-12 0.60% 0.32% 0.17% 0.60% 10.0 10.0 -14,750 -46.5 -43,000

Latam

Exit Short EUR / MXN Spot 26-Mar-12 16.85 17.2 16.99 17.25 16.85 10.0 10.0 -230,910 -2.3 2 -190,000

EEMEA

Hold Long EUR / CZK Spot 09-Nov-11 25.35 24.30 24.55 24.81 25.35 5.0 5.0 53,143 1.1 -1 -103,068

Hold Long USD / TRY Spot 26-Jan-12 1.80 1.79 1.80 1.80 1.75 1.75 10,568 0.6 -19 -36,109

Hold Long USD / TRY Spot 13-Feb-12 1.76 1.79 1.80 1.76 1.5 1.5 9,058 0.6 -19 12,947

Hold Long EUR / HUF Spot 22-Mar-12 293.3 287 294.3 298.2 293.3 10.0 10.0 121,334 1.2 -11 129,358

Hold Long Call 07-Nov-11 03-May-12 1.70% premium 0.12% 0.10% 1.70% 5.0 5.0 -1,000 0.0 -80,000

Hold Long Call 07-Nov-11 02-May-12 2.26% premium 0.00% 0.00% 2.26% 5.0 5.0 0 0.0 -113,000

Hold Long Call 28-Feb-12 30-May-12 1.45% premium 0.92% 0.91% 1.45% 10.0 10.0 -1,000 0.0 -54,000

Hold Short Put 15-Mar-12 15-Jun-12 0.27% premium 0.09% 0.05% 0.27% 10.0 10.0 -4,000 0.0 -22,000

Hold Long Call spread 17-Jan-12 17-Apr-12 0.58% premium 0.00% 0.00% 0.58% 10.0 10.0 0 0.0 -58,000

Hold Long Strangle 12-Jan-12 12-Apr-12 2.90% premium 1.67% 1.51% 2.90% 5.0 5.0 -8,000 -0.2 -69,500

EUR/CZK @ 26.00

Position ($m) P&L since last markAvg

entry

Rate

EUR/PLN @ 4.74

EUR/PLN @ 3.95

USD/TRY (1.83/1.96)

USD put /INR call

spread (48.3/49.7)

USD/RUB @ 30.25

EUR/PLN (4.60/4.75)

Source: Nomura

Global FX Weekly



Exhibit 2. EM Rates Portfolio

Country IRS/bonds Action Entry date Entry Stop 05-Apr 12-Apr DV01 Funding

3M Carry

(bp)

3M

Rolldown

(bp) 1-Week Total P&L ($)

Australasia

1 Australia Long ACGB 5.75% July 2022 Hold 9-Jan-12 11.75 10.30 10.00 40,000 AUD - - 12,000 70,000

Short ACGB 5.75% May 2021

2 Australia Receive 5Y BBSW/LIBOR Hold 5-Mar-12 34.75 27.30 26.00 10,000 AUD - - 13,000 87,500

3 Australia Long ACGB 4.25% July 2017 Hold 29-Mar-12 16.25 18.50 16.00 10,000 AUD - - 25,000 2,500

Short ACGB 4.5% October 2014

North Asia

1 Korea Receive 10y KTB ASW Spread^^ Hold 2-Dec-10 -22.0 -18.2 -18.2 4,673 KRW - - -87 17,570

2 Korea KTB 3s10s ASW Box Flattener^^ Hold 2-Dec-10 57.0 16.6 18.3 5,000 KRW - - -8,191 193,636

3 Korea Receive KRW 5Yfwd5Y IRS Hold 29-Feb-12 75.0 49.8 66.1 974 KRW - - -14,749 8,397

Pay USD 5Yfwd5Y IRS

Receive KRW 5Yfwd5Y IRS Hold 16-Feb-12 75.0 49.9 66.2 981 KRW - - -14,597 8,137

Pay USD 5Yfwd5Y IRS

Receive KRW 5Yfwd5Y IRS Hold 15-Dec-11 85.0 53.6 70.3 1,008 KRW - - -15,326 14,102

Pay USD 5Yfwd5Y IRS

Receive KRW 5Yfwd5Y IRS Enter 10-Apr-12 65.0 65.0 62.0 1,000 KRW - - 3,000 3,000

Pay USD 5Yfwd5Y IRS

4 Korea KRW 1y1y Receiver Spread* Hold 21-Feb-12 7.5 3.18 3.67 10bn KRW - - 401 -3,462

(Strikes 3.00, 2.50)

5 Korea KRW 2y5y ATM Straddle* Hold 2-Mar-12 262 247 249 10bn KRW - - -645 -16,688

Receive KRW 2y5y IRS (delta hedge) Hold 22-Mar-12 3.76 3.74 3.64 750 KRW - - 7,112 8,602

Pay KRW 2y5y IRS (delta hedge) Enter 12-Apr-12 3.65 3.65 750 KRW - - 0 0

6 Korea KRW 2s5s IRS Steepener Hold 9-Feb-12 3.5 -10.0 8.1 5.7 4,914 KRW - - -11,187 3,619

7 Taiwan Receive TWD 1y IRS Hold 18-Oct-11 0.87 0.88 0.88 25,176 TWD - - 11,637 8,659

Receive TWD 1y IRS Hold 15-Feb-12 0.87 0.91 0.90 10,000 TWD - - 9,823 -25,143

8 Taiwan Receive TWD 5y IRS Hold 15-Feb-12 35.00 33.11 33.50 5,000 TWD - - -1,950 7,500

Pay USD 10y IRS (wt 0.4)

Receive TWD 5y IRS Enter 10-Apr-12 35.0 35.0 34.0 5,000 TWD 5,000 5,000

Pay USD 10y IRS (wt 0.4)

South and South East Asia

1 Singapore Receive SGD 5Yfwd5y IRS Hold 2-Dec-10 223.0 164.0 164.8 7,273 SGD - - 1,202 390,190

Pay USD 5Yfwd5Y IRS (wt 0.4)

2 Singapore Receive SGD 5yfwd 5y IRS Hold 30-Nov-11 2.97 3.25 3.10 3.07 5,000 SGD - - 15,000 -50,000

3 Singapore Receive SGD 2yfwd 1y IRS Hold 29-Mar-12 1.065 1.25 1.14 1.05 5,000 SGD 47,350 7,500

4 Malaysia MYR 1yfwd 2s5s IRS Steepener Hold 21-Feb-12 36.0 26.0 43.3 38.5 7,419 MYR - - -34,803 18,037

5 Malaysia Receive MYR 2Yfwd1y IRS Hold 25-Jan-12 3.30 3.60 3.54 4,498 MYR - - 32,998 -116,472

6 India INR 2Yfwd1s5s Steepener*** Hold 20-Jan-12 20.0 15.0 14.0 7,000 INR - - -7,000 -42,000

7 India INR 2s5s Steepener Hold 27-Oct-11 -20.0 -30.0 -15.0 -16.0 6,052 INR - - -6,052 -39,337

US

1 US Pay Sep IMM FRA-OIS spread # Hold 29-Apr-10 24.0 31.5 33.5 10,000 USD - - 19,895 94,895

EEMEA

1 South Africa Buy S. Africa 5.5% 2023s - R197s Hold 30-Sep-10 2.61 2.80* 1.95 1.95 5,000 ZAR 16.2 -7,421 740,179

2 South Africa Receive USD 1mfwd10y vs. ZAR

1mfwd10y

Exit 3-Apr-12 541 510 548.95 561 10,000 ZAR/USD 1 120,500 200,000

3 EEMEA vs Sell 5yr CDS in TU, SA, RU, PO Hold 7-Mar-12 -7 6 12 10,000 USD -1.8 -58,263 -196,731

Europe Buy 5yr CDS in Austria, France, Belgium

4 Turkey Ccy TRY Flattener 2v5 1m forward Exit 23-Feb-12 -40 -15 -62 -67 5,000 TRY 9 25,000 150,000

5 Poland PLN Flattner 2v10 Hold 8-Mar-12 0 12 6 6 10,000 PLN 5,000 -55,000

6 Poland Pay PLN FRA 9v12 Hold 15-Mar-12 4.73 4.97 5.01 7,500 PLN 24,600 231,600

7 Israel Receive ILS 3mfwd5y Enter 10-Apr-12 3.55 3.77 3.55 3.59 10,000 ILS 12 -44,400 -44,400

LatAm

1 Belize Buy Belize 6.0% 2029s Hold 10-Feb-12 22.60 24.00 19.834 19.743 255 USD -- -371 91,317

Level Risk & Return P&L

* We present the premium in bps and notional in KRW bn for the sw aption. ^^ KAAH2 rolled to the next contract (KAAM2) on 19-Mar-12.

*** We have 30% of our intended position on, w e look to add at better levels.

Source: Nomura

Global FX Weekly



Exhibit 3a. Cumulative performance of EM positions Exhibit 3b. EM FX net positions

1-week PnL

(USD)

2012 YTD

(USD)

Past 52w

(USD)

EM FX P&L 42,367 -392,087 105,833

EM Rates P&L 153,477 2,067,194 11,610,375

Note: Asia FX and rates trades were priced as at 6pm on publication day (SGT). EEMEA FX and rates trades were priced as at 2pm on publication day (LDT).

-60

-50

-40

-30

-20

-10

0

10

20

30

40

US

D

HU

F

KR

W

CZ

K

TR

Y

SG

D

IDR

EU

R

HK

D

CN

Y

Asia, Latam and EMEA Allocation of FX Risk (Spot and NDF, USD mn)


Trade Summary

EEMEA Rates Summary:

1. On 10 April, we entered an ILS 3mfwd5y receiver at 3.55%, allocating USD 10k DV01 with

medium confidence level. We intend to double our risk if spot reaches 3.62%, with a stop-loss

level at 3.77%. Our target is the year to date lows of 3.1%.

2. On 10 April, we also took profit in our payer of ZAR 1mfwd10yr vs USD rates with the spread at

561bp, allowing us to bank 20bp or USD200K on the trade.

3. On 11 April, we took profit on our TRY 2v5 flattener, banking 30bp or USD150K on the trade.

Asia Rates Summary:

1. On 10 April, we added to our receive TWD 5y and USD 10y spread (1:0.4 weights) with USD5k

DV01. As we expect global factors (and US rates) to drive the back end of TWD curve in the near

term and there are limited local fundamentals to justify a large cheapness of TWD rates.

2. On 10 April, we added USD1k DV01 to our KRW-USD 5fwd5y spread position at 65bp to get the

overall position size to USD4k DV01. We maintain our medium-term tightening bias for the spread.

LatAm FX Summary:

1. On 10 April, we were stopped out of our short EURMXN spot trade and consequently booked a

USD190K loss.

LatAm FX Summary:

1. On 12 April, we scaled our short USD/CNY position to 60% of our desired maximum notional from

20% previously with the fixing date as 4 May 2012. As of now, we are more confident that the date

of the strategic and economic dialogue meeting will be at the start of May (most likely from the

4th). Once the official date of the May S&ED is announced, we will review our position and

possibly wait until closer to the G20 leaders meeting on 18-19 June before adding to our position.

Global FX Weekly



Regional Article

Sell USD/JPY volatility 1

When we revised our G10 currency forecast at the end of March (see Updated FX

Forecasts 29 March 2012), part of our emphasis was on the short-term bearish

view on USD/JPY: we maintained our Q2 target at 80, while the spot rate was

trading around 83 at that time. Our belief was that the USD/JPY rally since

February had been mainly driven by non-Japanese investors as evidenced by IMM

positioning data and our analysis of the USD/JPY performance differential

according to time zone (Tokyo vs offshore), and that the rally would be fragile

against potential weakness of US economic data and rate signals. We also argued

that the BOJ was unlikely to provide any additional easing measures unless

USD/JPY dropped significantly.

Over the past couple of weeks USD/JPY has behaved almost exactly as we had

expected: it is now traded at 80-81. As our Q2 target (80) suggests, we are now

more neutral on USD/JPY direction for the next few months. Below are the key

elements suggesting a range trade for USD/JPY.

Limited downside:

1. As we have already started to observe, JPY appreciation in itself will raise

expectations of a reaction from the BOJ (additional easing) at the next

meeting (27 April) and onwards. The finance minister will also likely start

verbal intervention.

2. While Japanese exporters have very conservative views on USD/JPY as

revealed by the latest BOJ Tankan, Japanese real money investors are

relatively optimistic about a medium-term uptrend of USD/JPY. They will

potentially be looking for buy-on-dip opportunities.

3. US interest rates have already gone down significantly. Further unwinding

of rate-sensitive positions should be moderate.

Limited upside:

1. It will be increasingly difficult for the BOJ/MOF to surprise forex market

participants. The BOJ‟s additional easing on 14 February was very

successful in promoting a “new/aggressive BOJ” but the market has

already become sceptical about its sustained commitment after its inaction

at yesterday‟s policy-setting meeting.

2. We believe the Japanese flow picture has potential to lift USD/JPY to 85 in

the second half of 2012. We are focusing on the sustained trade deficit and

cross-border M&A, and normalisation of asset management and life

insurance companies‟ investment in foreign securities should result in JPY-

selling pressure outweighing JPY-buying pressures. But that will take time

to gather momentum.

3. Our economists believe that US economic data could disappoint the

market in Q2 through seasonality. Thus, we think UST 10-year yields are

unlikely to achieve 2.5%, at which level Japanese investors say they may

accelerate their shift out of JGBs.

Volatility in USD/JPY is relatively elevated, with 3M implied trading at 10.25, close

to this year‟s high of 11. This contrasts with implied vols in other currency pairs

which are trading close to the lows. For example, EUR/USD 3M implied is at 10.7,

close to the low of 9.8 and far from the high of 14.7 at the beginning of the year. We

can make similar observations in GBP/USD and AUD/USD, where volatility is also

close to this year‟s lows. Given that USD/JPY vol seems comparatively expensive

1) First published as a G10 FX Portfolio Update on 11 April 2012

Yunosuke Ikeda

+81 3 6703 3885

[email protected]

Jens Nordvig

+1 212 667 1405

[email protected]

Yujiro Goto

+1 212 667 1083

[email protected]

Geoffrey Kendrick

+44 20 7103 6589

[email protected]

Saeed Amen

+44 (0) 20 710 37119

[email protected]

http://go.nomuranow.com/research/globalresearchportal/getpub.aspx?pid=505138


Global FX Weekly



and our expectation that spot is likely to range, we judge that these are good levels

to sell USD/JPY vol.

To express this view we sell a 3M USD/JPY strangle with strikes 78 and 83 for

1.78% (spot ref 80.88) in a notional of $20mn resulting in position size of $356k.

The breakeven levels are approximately 76.5 and 84.5. We also place call levels at

76.25 and 85. At expiry, reaching either of these levels would yield a loss of about

50bp on our position, which we judge to be good risk reward given the maximum

payoff is the premium of the option.

Our portfolio can be seen on p3.

Global FX Weekly



Regional Article

USD/CNY: Empirical support for our short

USD/CNY position 2

Further to our Asia FX insights: Adding to our short USD/CNY position (12 April

2012), we note some empirical evidence that supports our view that the Strategic

and Economic Dialogue (S&ED) is likely to be around 4 May 2012.

Based on our observation of fixings prior to previous major diplomatic events3,

fixings have tended to show an accelerated downward movement in the month

prior to an event. The median length for such phases of accelerated movement is

around 27 calendar days (around 20 trading days) for these bilateral diplomatic

events between US and China, which is generally preceded by a short phase of

higher USD/CNY fixes (see Exhibit 1).

We see a similar pattern now in the fixings. Since the conclusion of the Seoul

Nuclear Summit (where President Hu Jintao met President Obama) on 27 March,

USD/CNY fixings kept moving higher until 6 April (i.e. five trading sessions)4. This

short phase of bias towards higher fixes could have been because of the previous

fall in fixings, which happens prior to major diplomatic events (see Exhibit 2).

Exhibit. 1: Fixing changes around major diplomatic events between US and China (average and median case)

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

-20 -15 -10 -5 0 5 10 15 20

Median

Average

Lower fixings preceding major

Higher fixings preceding the

lower fixes

Event

Source: Bloomberg, Nomura

Exhibit. 2: Recent trend in fixings

6.28

6.29

6.30

6.31

6.32

6.33

6.34

4-Jan-12 4-Feb-12 4-Mar-12 4-Apr-12

USD/CNY fixings in 2012

Xi Jinpingin US

Significant drop in fixes

Phase of higher fixings

Probable start of lower

fixings prior to SED in May


Fixings have started to fall since 6 April with three of the last four fixings being

lower than their previous fixes and the last two surprising on the downside with

reference to Nomura‟s model prediction. If history is any indication of fix

movements prior to major events, we expect to see the fixings after 6 April to trend

downwards into the S&ED. The estimated length of 27 calendar days for the phase

of lower fixings takes us to 3 May, around which we would expect the S&ED to be

held.

2) First published as an Asia FX Insight on 12 April 2012 3) The events included for calculating the median include Wen Jiabao‟s US visit in September 2010, Hu Jintao's US visit in Jan 2011, SED in May 2011, Joe Biden's China visit in August 2011 and Xi Jinping's US visit in Feb 2012 4) A few statistics: change in fixings from 27 March to 6 April was +232pips; change in fixings after 6 April was -90pips; summation of model error from 27 March and 6 April was 96 pips (all fixings were higher than model predictions); summation of model error after 6 April: -24pips (last 2 fixings were lower than model predictions)

Prashant Pande +65 6433 6198

[email protected]

Craig Chan +65 64336106

[email protected]

Simon Flint +65 6433 6504

[email protected]

http://go.nomuranow.com/research/globalresearchportal/getpub.aspx?pid=508175&cid=+qV/Aa83aGc=

Global FX Weekly



Regional Article

Adding to our short USD/CNY position 5

As we discussed in USD/CNY: Plus ça change..., 27 March 2012, we expect some

CNY appreciation to commence in the second half of April, ahead of the Strategic

and Economic Dialogue (S&ED). Although the exact date of S&ED has not yet

been announced, logic suggests that we add6 US$20mn to our short USD/CNY

recommendation (fixing on 4 May 2012). This date is logical as it would provide the

Chinese with a little leeway after the Labour day holiday (30-April to 1 May) and

also give the US side some space ahead of G8 summit on 15 May.

This increase in notional should lift our short USD/CNY position to US$30mn or

60% of our desired maximum notional from 20% previously (see USD/CNY:

Dipping into shorts, 27 Feb 2012). Once the official date of the May S&ED is

announced, we will review our position and possibly wait until closer to the G20

leaders meeting on 18-19 June before adding to our position.

5) First published as an Asia FX Insight on 11 April 2012 6) Short USD-CNY value date 08 May 2012 (fix on 04 May 2012) at 6.3075, notional $20mn.


[email protected]

Craig Chan +65 64336106

[email protected]

Wee Choon Teo +65 6433 6107

[email protected]




Global FX Weekly



Regional Article

Asia FX portfolio update: Enter long 1M SGD

vs. a basket 7

Since we published our updated view8 on the upcoming Monetary Authority of

Singapore‟s (MAS) monetary policy announcement, spot S$NEER has traded

down from a 0.0% deviation from mid to -0.3% before settling at around -0.15%

(16:00 SGT, 10 April). This was mainly driven by the worse-than-expected US job

data released on 6 April. We think current level is attractive for us to enter a long

SGD vs. a basket to position for SGD strength.

We maintain our baseline view (60% probability) of no change in policy, and a 40%

probability of tightening through an increase in the slope of appreciation.

Supporting the risk of tightening is MAS Deputy Chairman Lim Hng Kiang, who

stated in Parliament on 9 April that the “MAS is very concerned about” core inflation

being “stuck at 3 per cent for a longish time” and that a stronger Singapore dollar

can help to cap both imported and domestic inflation9.

In the event the MAS does not change its policy, we only expect a small sell off in

the S$NEER toward a -0.5% deviation from the mid as the MAS is likely to be more

upbeat in its policy statements, which will increase the risk of tightening in October.

We would view this as an opportunity to buy SGD. If the MAS surprises with a

tightening, this will likely lead to a higher S$NEER, to possibly above a +1%

deviation from the midpoint. Hence, we think the risk-reward is compelling for us to

enter half our desired position ($10mn) on a long SGD vs. a basket10

and we will

add on the other half if the scenario of no policy change, upbeat policy statement

and a small sell off towards -0.5% materializes. In the scenario of policy tightening,

we expect S$NEER to spike up after the announcement before pulling back, and

we will review whether to add to our position.

7) First published as an Asia FX Insight on 10 April 2012 8) See Singapore: No policy change, but risk of tightening, 4 April 2012 9) See http://www.channelnewsasia.com/stories/singaporelocalnews/view/1194025/1/.html 10) Notional US$10mn (half our desired size); reassessment level -1.0%; value date 14 May 2012; short USD/SGD ($10mn at 1.2610), long 1M USD/MYR ($1.5mn, at 3.0805), long 1M USD/CNY ($1.3mn, 6.3150), long USD/JPY ($1.1, 81.32), short EUR/USD ($1.1, 1.3093), long 1M USD/IDR ($0.8mn, 9195), long 1M USD/KRW ($0.5mn, 1144.0), long 1M USD/TWD ($0.4mn, 29.505), long USD/THB ($0.2mn, 30.96), long 1M USD/INR ($0.2mn, 51.73), long 1M USD/PHP ($0.2mn, 42.91), short AUD/USD ($0.3mn, 1.0300) and short GBP/USD ($0.3mn, 1.5879). Annualised carry -1.0%.


[email protected]

Craig Chan +65 64336106

[email protected]

Wee Choon Teo +65 6433 6107

[email protected]


http://www.channelnewsasia.com/stories/singaporelocalnews/view/1194025/1/.html

Global FX Weekly



Regional Article

TRY 2v5 flatteners: Taking profits 11

Time for directional longs is getting near

On 23 February, we entered 2v5 flatteners in TRY curve again at a 1-month

forward start rate of -40. We rolled the position on 23 March at -4.5bp resulting in a

breakeven rate (for unwind today) at -37. Today the 2v5 slope is trading at -67. The

slope never reached our adding point of -25. We are taking profit because we see a

higher probability of our bullish base case materialising for 2012 and a higher

probability of a bigger sell-off if we are wrong, which is deteriorating risk reward for

flatteners. We are banking 30bp or US$150k on this trade. We remain short Turkey

CDS in our “EM insanity” basket.

We no longer see flatteners as the highest expected Sharpe ratio trade in

Turkey rates: When we initiated flatteners in the second half of February,

directional longs in Turkish benchmark bills were the most popular trade (which

then sold off around 70bp). Then paying rates became popular (with a 30bp stop-

loss-run in TRY 1fwd1y that meant the 7bp roll-up-per-month did provide little

protection). The flattener was not volatile at all, which makes the 4bp per month

quite a good roll-up for the trade (Exhibit 1). Furthermore, it was not just a currency

trade as the TRY basket (vs USD and EUR) was identical to its current level when

the trade was initiated, but the curve is now 30bp flatter.

So why take profit now?

Our base case is actually quite bullish. We did believe that Turkey‟s i-cloud had

to go higher first and then lower within our framework. Our point was that the

economy arguably did not need this sort of tightening and rebalancing was in fact

taking place “at the right speed” (as we explain in the linked report). As our readers

know, soft landings are rare in emerging markets that grow a few years above

potential, but Turkey seems to be achieving that.

Exhibit. 1: Our activity on TRY 2v5

-80

-75

-70

-65

-60

-55

-50

-45

-40

-35

-30

1-Feb 15-Feb 29-Feb 14-Mar 28-Mar 11-Apr 25-Apr

TRY xccy 2v5bp

Entered with spot at -43bp

Exit at -67bp, at a profit of USD150K

Rolled the position at -4.5bp, giving us a break-even rate of -37

Source: Nomura, Bloomberg

11) First published as an EM FX Portfolio Update on 11 April 2012

Olgay Buyukkayali +44 (0) 20 710 23242

[email protected]

http://intranet.nomuranow.com/research/globalresearchportal/getpub.aspx?pid=496779



Global FX Weekly



Exhibit. 2: TCMB’s “i-cloud” against TRY vs EMFX

98

100

102

104

106

108

110

0

2

4

6

8

10

12

Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12

Corridor

Repo rate (5-day moving average)

TRY vs. EMFX (rhs)

% TRY vs. EMFX Index

Repo rises, currency rallies

Repo rises, currency f lat


Recent economic data suggest our 2012 framework that sees the current account

deficit at 7% of GDP, 3% for growth and 7.5% for inflation is spot on (with slight

upside risks to all of them, i.e., slightly higher inflation / deficit / growth risk).

Nevertheless, in our view, both the upcoming inflation numbers (possibility of an

upside surprise for April or stickiness at high CPI rates for a few months) and the

recent risk aversion offer good opportunities to get involved in the rates market

taking directional positions via receiving or bond buying in the long end. As we

expect a different type of risk aversion to remain for a while, we are not getting

involved yet, but our bias is to fade upcoming weakness on the rates front.

If we are wrong, the curve could bear steepen. While the current policy of

keeping the i-cloud higher is helping the rebalancing accelerate, it has its own

problems too. One of them is the “unintended consequences” that we described

recently in the linked report. The problem occurs when the extraordinary becomes

ordinary, i.e., the currency‟s sensitivity to rises in the i-cloud decreases (Exhibit 2).

We wrote about this lower sensitivity to corridor at the end of March, and we think

the recent price action supports our claim. There is of course another unintended

consequence that comes with implicit currency targeting: a country that has

persistently higher inflation than its trade partners for five years needs to have 27%

REER depreciation to remain competitive. That is the risk if the TCMB becomes

“too successful” with its policy of tightening and if TRY outperforms, it becomes

very overvalued vs. its peers on a REER-basis.

In short, if we are right about our Turkey framework, there are better ways to invest

other than the curve trade. And if we are wrong, the curve could bear steepen, so

taking profit makes sense at this point.

For full details on our model portfolio, please see our p4-5.

Related Turkey research:

First Insights: TCMB: A tad more hawkish (in rhetoric)

First Insights: TCMB Preview: No easing in exceptional days

Much ado about (a flat TRY)…

Country Views: TCMB's I-cloud & the Law of Unintended Consequences








Global FX Weekly



Regional Article

Big move & take profit on ZAR 10yr vs. USD

10yr 12

Further acceleration in USD rate rally makes the trade less compelling

Last Tuesday, we paid ZAR 1mfwd10y vs. USD rates at 541bp (see Will EM

duration follow FX? In ZAR it could…). That spread is 561bp today allowing us to

bank 20bp or US$200k on the trade. The rationale for the trade was 1) Stale

positioning on ZAR long end, 2) The lack of correlation of the long end with local

inflation dynamics which are improving in the short term, 3) Countercyclical fiscal

policy weighing on the long end, 4) ZAR long end tick-trading with currency and

moving higher in risk-off environments (but not lower in risk-on ones) making it a

compelling pay. In other words, we positioned for the optionality over extreme

optimism on US growth. Using ZAR rates as our proposal meant this spread would

widen sharply should the US rates market go through a correction, as ZAR long

end would lag.

We still think this trade should work going forward and think the spread could hit

600bp, but we are also conscious of the fact that this spread has not moved 20bp

in such a short time in the past six months (Exhibit 1). Furthermore, in our scenario

matrix in Exhibit 2, we are moving from the second quadrant to the third, i.e., the

USD/ZAR spiking higher scenario to global positioning unwind, and the next move

should be the market speculating on the Fed implementing QE III should risk

aversion accelerate further. That does not make paying ZAR vs. USD a very

efficient way to express a position, as last time this speculation took place ZAR

rates outperformed.

Exhibit. 1: Our activity in ZAR rates

510

520

530

540

550

560

570

580

590

Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12

ZAR 1mfwd10y - USD 1mfwd10ybp

Enter trade at 541bp

Take profit at 561bp


Last, but not least, today is also the first day ZAR rates have traded relatively well

when USD/ZAR is breaking sharply higher. That suggests technical are better than

they were 10 days ago. All in all, we are less convinced about our 10yr payer in

ZAR vs. USD and following a quick 20bp on the spread, we think it better to be flat

than short and expressing global themes with ILS 5yr offers higher risk reward than

paying ZAR vs. USD (see That time of the year again : REC ILS 5y).

For more details on our model portfolio, please see p4-5.



[email protected]

Peter Attard Montalto +44 (0) 20 710 28440

[email protected]




Global FX Weekly



Exhibit. 2: Scenario matrix

Source: Nomura

Global FX Weekly



Regional Article

That time of the year again: REC ILS 5y 13

We need an EM proxy to trade lower global real yields in strong balance sheet

economies; it's ILS

We are receiving ILS 3mfwd5y at 3.55% (spot 5y is at 3.43%, implying 12bp of roll

down in three months). We allocate US$10k/bp to this trade, our conviction level is

medium. We intend to double our risk at 3.62% spot with a stop-loss level at 3.77%

(break of recent highs). Our target is 3.10%, year-to-date lows (Exhibit 1).

Some of the recent noisy price action has provided some important signals for

market themes: 1) the extreme pessimism surrounding rates, bonds and asset

allocation into equities has stopped (being re-questioned we think); 2) as Swiss and

German fixed income has signalled the return “off” the money and the drive for

safety remains the underlying theme rather than return “on” the money; and 3)

inflation break-evens are going up while 10yr rates globally (in strong balance sheet

economies or reserve currencies) have reversed their rise, i.e., the real yields on

market rates are going down again.

These themes have implications for the ILS market. The ILS rate market is one of

the very few EM markets where the currency does not matter for the 5yr (Exhibit 2).

Particularly with currency weakness hurting rate markets in EEMEA, ILS stands out

where one can trade global macro reasonably well in a risk-off period. Note also

that the ILS rate market is not very sensitive to EM inflows, as it is not a part of the

EM local market benchmarks, providing resilience when inflows slow or reverse.

More importantly, the ILS market is strongly correlated with US rates, but has

underperformed on the very recent rally. In our view, the main reason for this was

the market pricing in a worse budget deficit for 2013, as wide as 3-4% of GDP and

higher issuance over the next 12 months, but can this really be a game-changer for

5yr ILS swaps? We doubt it. Why?

First, the Bank of Israel has signalled the need for fiscal tightening fairly openly and

the way the Q1 budget numbers deteriorated sharply is likely to result in some

government spending cuts (or cut plans for 2013). We do not believe the fiscal drag

is sufficiently big to result in monetary policy tightening again partly because we

believe the government will signal tightening over the next few months.

Exhibit. 1: Trade details

3.0

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4.0

Sep-11 Dec-11 Mar-12 Jun-12 Sep-12

ILS 3mfwd5yr%

Receive here

Stop-loss

Target

Doubleexposure

at 3.62%

spot

(currently 3.43%)


Exhibit. 2: ILS 5yr vs USDILS

3

3.2

3.4

3.6

3.8

4

4.2

4.4

4.6

4.8

5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

Jan-06 Jan-08 Jan-10 Jan-12

ILS 5yrUSDILS (rhs)

%




[email protected]

Global FX Weekly



Second, we always describe monetary policy in Israel as “inflation targeting with a

global growth kicker”. So far the inflation dynamics appear stable in

y-o-y terms (Exhibit 3) and have deteriorated in sequential terms (Exhibit 4). The

sequential deterioration has contributed to the weakness in the rates, and probably

was the one reason paying ILS rates have been a popular trade this year with local

support to the global backdrop.

Exhibit. 3: Israel CPI (% y-o-y) comfortably within targets

-2

-1

1

2

3

4

5

6

7

Jan-05 Feb-06 Mar-07 Apr-08 May-09 Jun-10 Jul-11

% y-o-y CPI excl housingCPI excl veg, fruits and housingCPI excl veg and fruitsCPI

Source: Nomura, CBS

Exhibit. 4: Israel CPI (% 3m/3m SAAR) sequentially moved higher

-8

-6

-4

-2

0

2

4

6

8

Apr-08 Nov-08 Jun-09 Jan-10 Aug-10 Mar-11 Oct-11

3m/3m SAAR (%)

CPI (sa)

CPI excl veg and fruits (sa)

CPI excl housing (sa)

CPI excl energy (sa)

Source: Nomura, CBS

Nevertheless, globally, inflation break-evens remained sticky, while rates are

moving lower (Exhibit 5), which has also started to spill over into ILS markets

(Exhibit 6). Both Exhibit 5 and 6 show that real rates are about to contract once

again. On the most recent minutes, the Bank of Israel elaborated on inflation break-

evens and highlighted that energy prices have been driving up the inflation-

breakevens rather than underlying inflation, while signalling a limited response to

energy price-driven inflationary expectations. This suggests to us that monetary

policy will be unchanged on a continuation of a local (slow) recovery, but will be

open-minded to global (euro-centric) deterioration.

To us, a different type of risk aversion means ILS 5yr stands out as it benefits from

1) technical positioning as underlying pay USD rates views were expressed

through the ILS rate market; 2) monetary policy does not look like it will tighten

anytime soon with optionality to deterioration around Europe; and 3) the flight back

to safety as both locals and internationals could express global real rate contraction

themes with the ILS rate market. Hence, we are starting to receive rates. For full

details on our model portfolio please see p4-5.

Exhibit. 5: US 10yr government bonds vs breakevens

Real rates are falling again

0

1

2

3

4

5

6

Jan-05 Jul-06 Jan-08 Jul-09 Jan-11

US 10yr GBs US 10yr breakeven%


Exhibit. 6: Israel 5yr government bonds vs breakevens

Real rates are falling again

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12

ILS 5yr GBs ILS 5yr breakeven%



Global FX Weekly



Mexico: Election 10114

Every six years (“sexenio” in Spanish), a new president is elected along with the

entire congress, comprising 500 members in the lower house and 128 in the

senate. Three main parties are contending for the July 1 general election: the PAN

(right leaning), the PRD (left leaning) and the PRI (centre left).

Truly free and democratic elections in Mexico are a relatively new phenomenon

that consolidated in the 2000 electoral process. This makes the renewal of the

government very important. One party, the PRI, ruled for nearly 80 years from the

1910-20 revolution until 2000. Since then two PAN presidents have governed

Mexico: Vicente Fox (2000-06) and sitting president Felipe Calderón (2006-12).

The candidates and the parties

1) Partido Acción Nacional (PAN, )

Supports private sector participation in the economy and is the most

market-friendly party in the political spectrum.

Conservative on social issues. Closer to the doctrine of the Catholic

church.

Controls six states (out of 32) and three in coalition with the PRD. Also, it is

the first minority in the senate.

Josefina Vázquez Mota (JVM)

First female presidential candidate from a major party.

Former federal deputy and head of the PAN‟s bloc in the lower house. Also

former education and social development minister.

JVM studied economics at „Universidad Iberoamericana‟ and completed

post-graduate studies at the ITAM and IPADE universities, aged 50.

2) Partido Revolucionario Institucional (PRI, – )

The party has changed its ideology several times over time. Currently it is

much closer to the PAN but still supports a strong role of the state in the

economy.

Some wings of the party support more private investment in the energy

sector and a widening of the taxable base, and in that sense are closer to

the PAN. Other wings are closer to the PRD because of their support of the

stronger role of the state in the economy. They oppose the privatization in

the electricity and energy sectors, which are currently completely

dominated by the state due to constitutional locks.

Controls 20 states (out of 32) and in alliance with the Green Party has the

majority in the lower house.

Enrique Peña Nieto (EPN)

Former governor of the state of Mexico, which is the most populous state in

the country.

He has close ties with the „old guard‟ of the PRI. Some of these politicians

look at the opening and freeing of the democratic system with skepticism

and favor a stronger role of the state in the economy. However, as

governor of the State of Mexico he got closer to the PRI technocrats, who

favor a larger role of the private sector in the economy.

14) First published as an EM Country & Region Views Update on 10 April 2012

Benito Berber +1 212 667 9503

[email protected]

Global FX Weekly



EPN has a law degree from „Universidad Panamericana‟ and an MBA from

„Instituto Tecnológico y de Estudios Superiores de Monterrey - ITESM‟,

aged 45.

3) Partido de la Revolución Democrática (PRD, )

Supports the participation of the state in the economy, more so than the

PRI.

Liberal in social issues.

Controls three states (out of 32) and three in coalition with the PAN.

Andrés Manuel López Obrador (AMLO)

Former mayor of Mexico City.

In 2006 he narrowly lost the election to President Calderón. AMLO closed

several streets in Mexico City for many weeks in protest. The fact his

accusations were never found to be true triggered a decline in his

popularity.

AMLO studied political science and public administration at the UNAM

university, aged 59.

Exhibit. 1: Mexico: Political map

Source: IFE, Nomura

Will elections change the current economic policy framework?

Elections usually bring the wind of change and the July electoral process should be

no exception. We summarize the key possible changes by asking the following two

questions:

1. Could Mexico end up being governed by a party that supports policies that

could jeopardize macroeconomic stability such as increasing fiscal

spending irresponsibly, denting central bank independence, interfering with

foreign capital inflows or the FX system, reversing free trade agreements

or damaging private property and private investment?

2. What is the likelihood of Mexico adopting policies, as a result of the

election, that foster economic growth based on market-related

mechanisms and private sector participation?

Global FX Weekly



Answer to question #1. We believe that none of the three main parties would

implement policies that would endanger macroeconomic stability. Even were the

left-leaning PRD party to win the election, which the polls suggest is extremely

unlikely, we doubt the hard-won macroeconomic stability of the country would be at

risk. If the PRD‟s candidate, AMLO, were to win the presidential election, fiscal

prudence would be maintained, Banxico would remain independent and private

property would not be at risk. However, it is likely that the government would

solidify the role of state-owned companies in the electricity and oil sectors. In a very

broad sense, policy-wise the PRD seems closer to the PT in Brazil than to the

Chavismo in Venezuela.

Answer to question #2. Mexico‟s potential GDP rate is one of the lowest in Latin

America (see Exhibit 2). Therefore, we think the economy badly needs structural

reforms in many areas in order to boost productivity such as: (a) energy reform to

increase private investment and improve efficiency, (b) labor reform to increase

flexibility in the sector, (c) fiscal reform to reduce the dependence of fiscal revenues

on oil income, and (d) political reform to improve governability (for example, there is

no re-election in congress of the same member after three years in the lower house

and six years in the senate. This tends to weaken the link between deputies and

voters and strengthens the ties between deputies and their parties).

Exhibit. 2: Potential GDP for major LatAm countries

Source: Nomura

The joint support of the PRI and PAN could go a long way in terms of passing

structural reforms in congress to address these issues:

We would expect the PAN‟s JVM to send proposals to congress to

diminish the role of the state monopolies in electricity and oil, to propose

fiscal reform and support labor reform to reduce labor market rigidities.

If the PRI presidential candidate, EPN, wins the election we expect a

marked improvement in governance (as the PRI includes more

professional politicians and technocrats than the other two parties) with

respect to the previous two presidential terms. We would expect more

participation of the private sector in the oil sector but within the current

legal framework. In addition we would expect an increase in non-oil

revenues (via removal of tax exemptions) to finance a universal social

safety net (consisting of a minimum pension for all workers, access to

health services and unemployment insurance).

Latest polls

Global FX Weekly



All polls suggest EPN will likely win the election. Polls also suggest the PRI has a

high probability of winning the majority in the lower house and has a chance of

winning a majority in the senate. As of the end of March, and taking an average of

the major six pollsters (Mitoksky, Excelsior, OEM, Reforma, ISA, El Universal),

EPN (PRI) leads the effective voter‟s preference (which excludes undecided votes)

with 48.4%, followed by JVM (PAN) with 29.5%, and AMLO (PRD) in third place

with 21.3%. In gross terms (taking into account undecided voters), the PRI has a

lead of almost 16pp over the PAN and of 21pp over the PRD (Exhibit 3).

Exhibit. 3: Mexico: Gross voting preference for the presidential race

Source: Consulta Mitoksky, Nomura

The latest polls suggest that PRI‟s EPN is in a remarkably strong position to win the

election:

EPN has the lowest rejection vote and the highest positive perception

among the three candidates.

Interestingly, the PRI, like its presidential candidate, is the party with the

highest positive perception among voters.

According to pollster, Consulta Mitoksky, the difference between the lowest

level of confidence in EPN and the highest level of confidence in JVM, who

is in second place, is 12%, which is a large gap.

EPN is beating all candidates in three of the four regions of the country and

is tying with JVM in the west region.

Undecided voters amount to between 20% and 30% of the voting population and

while their votes have been crucial in the past, we believe this time around that

might not be a decisive factor. We expect the number of undecided to diminish as

election day (July 1) approaches. Furthermore, it is unlikely that all of them favor

one of the candidates. Most likely their vote will be distributed in a similar way to the

people who have already signaled their intention to vote. Therefore, unless polls

suggest that the race is getting tighter, we believe undecided voters will not

surprise us.

While JVM narrowly leads AMLO for second place, EPN‟s lead over JVM seems

insurmountable. Unless EPN makes some terrible mistakes, he looks likely to

become the next president according to the polls. EPN has made some mistakes in

public events and therefore the market will likely focus squarely on the first

presidential debate on May 6.

Market repercussions

Global FX Weekly



Unless AMLO‟s poll numbers increase to within 5% of EPN‟s, which is extremely

unlikely, we believe the market will not react negatively to the election noise.

Therefore, the key question is whether the market could start pricing in the passage

of at least one structural reform if EPN and the PRI increase their lead in polls for

the presidential and congressional races respectively. While an eventual EPN

victory would likely boost the probability that some of the structural reforms get

approved next year, we believe the market will remain cautious and not rally

significantly on the back of an EPN victory. Amidst a still fragile US economy

recovery, recession in the eurozone and a soft landing in China, we expect market

participants in Mexico to wait until the next president assumes power on December

1 before turning particularly bullish.

Conclusion

We are cautiously optimistic about the results of the electoral process of July 1. In

our view, the election should have no negative spillover effects on the market.

However, in the unlikely scenario that the PRD‟s AMLO rises in the polls, we could

see some weakness in asset prices, which we would fade because we believe a

PRD government will not put macroeconomic stability at risk. Polls suggest the

PRI‟s EPN will most likely be the next president of Mexico. If this indeed occurs, we

would expect at least one of the structural reforms to be proposed and approved by

congress. We think EPN would likely propose a fiscal reform that would increase

non-oil revenues and foster greater participation of the market in the energy sector

but within the current legal framework.

Global FX Weekly




Asia FX Positioning Indices Using option, implied yield and equity flow data to determine positioning

In an effort to gauge FX positioning14

for KRW, TWD, INR and IDR, we have

created indices based on option risk reversals, offshore-onshore implied yield

spreads and net foreign equity flow data.

Summary

Korea: The USD/KRW positioning index has been neutral since 30-Mar-12. Of

the past 126 trading days, the positioning index was short for 47 sessions and

long for 13.

Taiwan: The USD/TWD positioning index has been long since 09-Apr-12. Of the

past 126 trading days, the positioning index was short for 46 sessions and long

for 10.

India: The USD/INR positioning index has been neutral since 09-Apr-12. Of the

past 126 trading days, the index was short for 45 sessions and long for 18.

Indonesia: The USD/IDR positioning index turned long on 11-Apr-12. Of the past

126 trading days, the index was short for 57 sessions and long for 2.

This report is published every Thursday. The construction of this model is

detailed in FX Insights: Asia FX Positioning Indices (March 20, 2009).

17) See FX Insights: Nomura FX Positioning Index, 5-March-2009 for USD and JPY crosses positioning index.

Wee Choon Teo

+65 6433 6107

[email protected]

Craig Chan

+65 6433 6106

[email protected]

http://www.nomura.com/research/getpub.aspx?pid=313950&cid=44221

Global FX Weekly



Exhibit 1a. USD/KRW positioning index and spot FX Exhibit 1b. USD/TWD positioning index and spot FX

1100

1110

1120

1130

1140

1150

1160

1170

1180

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

USD/KRW Positioning Index (LHS)

USD/KRW Spot (RHS)

Trending long USD Asia

Trending short USD Asia

29.4

29.6

29.8

30.0

30.2

30.4

30.6

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0


USD/TWD Positioning Index (LHS)

USD/TWD Spot (RHS)



Source: Bloomberg, Nomura Source: Bloomberg, Nomura

Exhibit 1c. USD/INR positioning index and spot FX Exhibit 1d. USD/IDR positioning index and spot FX

47.0

48.0

49.0

50.0

51.0

52.0

53.0

54.0

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0


USD/INR Positioning Index (LHS)

USD/INR Spot (RHS)



8800

8850

8900

8950

9000

9050

9100

9150

9200

9250

9300

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0


USD/IDR Positioning Index (LHS)

USD/IDR Spot (RHS)




Exhibit 2. Trading model Exhibit 3. Recent data points

Trading model details

11-Apr-12 USD/KRW USD/TWD USD/INR USD/IDR

Lower Threshold* 30% 30% 30% 30%

Upper Threshold* 70% 70% 70% 70%

Current level signal 50.0% 86.5% 66.7% 72.2%

Current trade signal hold long hold long

Days in signal 9 3 3 1

Short signal (126 days) 47 46 45 57

Long signal (126 days) 13 10 18 2

YTD return** 1.50% -0.90% 6.65% -2.58%

Rolling 1Y return** 7.4% 3.1% 16.6% -6.2%

Rolling 1Y Ann. IR** 0.78 0.86 2.27 -1.02

* We long USD/Asia when signal rank > upper threshold and absolute index > 0, short

when signal rank < lower threshold and absolute index < 0, and hold otherwise. We

select an arbitrary threshold of 30/70% for all currency pairs.

** Return calculated assuming 5bp transaction cost.

Recent ranking percentile over past 6-month period

USD/KRW USD/TWD USD/INR USD/IDR

11-Apr-12 50.0% 86.5% 66.7% 72.2%

10-Apr-12 60.3% 78.6% 44.4% 65.1%

9-Apr-12 46.8% 77.8% 44.4% 46.8%

6-Apr-12 55.6% 68.3% 76.2% 21.4%

5-Apr-12 42.9% 66.7% 84.1% 14.3%

4-Apr-12 31.0% 50.8% 44.4% 9.5%

3-Apr-12 46.0% 35.7% 48.4% 4.0%

2-Apr-12 37.3% 27.0% 91.3% 8.7%

30-Mar-12 38.1% 52.4% 86.5% 11.1%

29-Mar-12 11.1% 56.3% 55.6% 28.6%

- co lor means to be neutral USD/Asia

- co lor means to be short USD/Asia

- co lor means to be long USD/Asia


Global FX Weekly



Exhibit. 4: Longer history with corresponding returns

Recent ranking percentile w ith corresponding daily return (include carry)

USD/KRW Daily Ret USD/TWD Daily Ret USD/INR Daily Ret USD/IDR Daily Ret

11-Apr-12 50.0% 86.5% 0.0% 66.7% 72.2% 0.0%

10-Apr-12 60.3% 78.6% -0.1% 44.4% 65.1%

9-Apr-12 46.8% 77.8% 0.0% 44.4% 46.8%

6-Apr-12 55.6% 68.3% 76.2% 0.1% 21.4% 0.0%

5-Apr-12 42.9% 66.7% 84.1% 0.2% 14.3% 0.0%

4-Apr-12 31.0% 50.8% 44.4% 9.5% 0.1%

3-Apr-12 46.0% 35.7% 48.4% 4.0% -0.3%

2-Apr-12 37.3% 27.0% 0.0% 91.3% -0.5% 8.7% 0.4%

30-Mar-12 38.1% 52.4% 86.5% 0.0% 11.1% -0.1%

29-Mar-12 11.1% 0.5% 56.3% 55.6% 28.6% 0.4%

28-Mar-12 43.7% 36.5% 54.8% 27.8% 0.1%

27-Mar-12 45.2% 25.4% 0.0% 61.1% 17.5% 0.0%

26-Mar-12 54.0% 75.4% -0.4% 57.1% 28.6% 0.1%

23-Mar-12 38.1% 50.0% 65.1% 24.6% -0.1%

22-Mar-12 45.2% 69.0% 54.0% 15.1% 0.0%

21-Mar-12 43.7% 46.0% 36.5% 15.1% -0.1%

20-Mar-12 31.0% 50.8% 36.5% 7.9% 0.0%

19-Mar-12 62.7% 10.3% -0.2% 21.4% -0.3% 2.4%

16-Mar-12 21.4% 0.3% 12.7% 0.1% 21.4% 0.2% 1.6% 0.2%

15-Mar-12 40.5% 7.9% 0.0% 27.8% 0.4% 0.8% 0.4%

14-Mar-12 49.2% 11.1% -0.1% 31.7% 2.4% -0.3%

13-Mar-12 61.9% 28.6% 0.0% 31.7% 7.9% -0.3%

12-Mar-12 60.3% 38.1% 37.3% 19.0% -0.2%

9-Mar-12 60.3% 30.2% 47.6% 12.7% -0.4%

8-Mar-12 49.2% 35.7% 42.9% 13.5% -0.1%

7-Mar-12 70.6% -0.7% 45.2% 32.5% 22.2% 0.5%

6-Mar-12 38.9% 46.8% 34.1% 7.1% -0.1%

5-Mar-12 24.6% -0.6% 25.4% -0.1% 31.7% 7.1% -0.2%

2-Mar-12 27.0% -0.1% 18.3% -0.2% 11.1% -0.9% 18.3% -0.3%

1-Mar-12 31.0% 14.3% -0.1% 5.6% -0.5% 24.6% 0.1%

29-Feb-12 34.1% 31.0% 3.2% -0.4% 33.3%

28-Feb-12 16.7% 1.0% 40.5% 15.1% 0.1% 54.0%

27-Feb-12 10.3% 0.4% 42.9% 11.9% 0.5% 58.7%

24-Feb-12 7.9% -0.5% 41.3% 29.4% -0.4% 35.7%

23-Feb-12 59.5% 35.7% 26.2% 0.4% 19.8% -0.3%

22-Feb-12 58.7% 34.1% 18.3% 0.2% 18.3% 0.1%

21-Feb-12 88.9% 0.2% 23.0% -0.1% 13.5% -0.1% 18.3% 0.0%

20-Feb-12 25.4% -0.2% 15.1% 0.0% 12.7% 0.1% 19.8% -0.7%

17-Feb-12 19.8% 0.1% 34.1% 11.9% 0.0% 23.8%

16-Feb-12 23.0% 0.9% 46.0% 15.1% 0.4% 65.1%

15-Feb-12 22.2% -1.1% 38.9% 5.6% -0.1% 20.6% -0.1%

14-Feb-12 11.9% 0.2% 34.1% 14.3% 0.0% 31.0%

13-Feb-12 14.3% -0.3% 23.8% -0.3% 5.6% -0.2% 28.6%

10-Feb-12 17.5% 0.4% 25.4% 0.2% 15.9% 0.7% 34.9%

9-Feb-12 14.3% -0.4% 17.5% -0.3% 14.3% -0.1% 19.8% -0.1%

8-Feb-12 13.5% -0.3% 15.9% 0.2% 2.4% -0.6% 42.9%

7-Feb-12 11.1% 0.3% 31.7% 1.6% -0.3% 11.1% 0.0%

6-Feb-12 25.4% 0.5% 39.7% 1.6% 0.2% 8.7% 0.1%

3-Feb-12 14.3% -0.7% 18.3% -0.4% 2.4% -0.9% 12.7% -0.3%

2-Feb-12 10.3% 0.1% 16.7% 0.0% 1.6% 0.9% 10.3% 0.3%

1-Feb-12 31.7% 14.3% 0.3% 1.6% 0.3% 32.5%

31-Jan-12 7.9% -0.2% 16.7% 0.3% 1.6% 0.3% 23.8%

30-Jan-12 3.2% 0.9% 23.8% 14.3% 0.5% 36.5%

27-Jan-12 3.2% -1.0% 0.8% 0.0% 4.0% -0.7% 11.1% -0.4%

26-Jan-12 1.6% 0.0% 0.8% 0.2% 0.8% 1.9% 5.6% -0.2%

25-Jan-12 3.2% 0.8% 10.3% 0.4% 4.8% -0.1% 5.6% 0.8%

24-Jan-12 1.6% 0.3% 11.9% 0.0% 3.2% -0.3% 2.4% -0.7%

23-Jan-12 0.8% -0.5% 10.3% 0.0% 4.8% 0.2% 0.8% -0.4%

20-Jan-12 0.8% 0.7% 11.9% 0.0% 10.3% 0.6% 0.8% 0.8%

19-Jan-12 4.0% 0.1% 7.9% -0.2% 1.6% -0.1% 6.3% -0.5%

- color means to be short USD/Asia

- color means to be long USD/Asia

- color means to be neutral USD/Asia (corresponding return w ill be left as blank)



Global FX Weekly



Asia Local Market Rate Expectations15

Summary of Expected Rate Changes16:

Japan: The swap curve is pricing in 0bp of rate changes in 3M (1W change at 2bp) and -1bp of changes in 12M (1W change at 2bp) on 12-Apr-12.

Korea: The swap curve is pricing in -4bp of rate changes in 3M (1W change at -2bp) and -13bp of changes in 12M (1W change at -5bp) on 12-Apr-12.

Australia: The swap curve is pricing in -26bp of rate changes in 3M (1W change at 9bp) and -54bp of changes in 12M (1W change at 6bp) on 12-Apr-12.

New Zealand: The swap curve is pricing in -4bp of rate changes in 3M (1W

change at -1bp) and 13bp of changes in 12M (1W change at -8bp) on 12-Apr-12.

China: The swap curve is pricing in -16bp of rate changes in 3M (1W change at -6bp) and -24bp of changes in 12M (1W change at -2bp) on 12-Apr-12.

Hong Kong: The swap curve is pricing in -5bp of rate changes in 3M (1W change at 0bp) and -6bp of changes in 12M (1W change at 1bp) on 12-Apr-12.

Taiwan: The swap curve is pricing in 5bp of rate changes in 3M (1W change at -2bp) and 10bp of changes in 12M (1W change at 1bp) on 12-Apr-12.

India: The swap curve is pricing in -67bp of rate changes in 3M (1W change at -14bp) and -104bp of changes in 12M (1W change at -5bp) on 12-Apr-12.

Malaysia: The swap curve is pricing in -2bp of rate changes in 3M (1W change

at 0bp) and -7bp of changes in 12M (1W change at -3bp) on 12-Apr-12.

Singapore: The swap curve is pricing in -5bp of rate changes in 3M (1W change at 1bp) and -16bp of changes in 12M (1W change at 6bp) on 12-Apr-12.

Thailand: The swap curve is pricing in 18bp of rate changes in 3M (1W change at -6bp) and 23bp of changes in 12M (1W change at -8bp) on 12-Apr-12.

8) For the methodology to extract interest rate expectations, please refer to Asia Local Market Rate Expectations: A Factor Decomposition Approach (December 16, 2008) and Asia interest rate strategy - Extending our rates expectations model to the AUD market (October 5, 2009).

Kewei Yang +65-6433-6246

[email protected]

Prashant Pande +65-6433-6198

[email protected]

Prateek Gupta +65-6433-6197

[email protected]

Craig Chan +65-6433-6106

[email protected]

Simon Flint +65-6433-6105

[email protected]

Wee Choon Teo +65-6433-6107

[email protected]

http://www.nomura.com/research/getpub.aspx?pid=302440

http://www.nomura.com/research/getpub.aspx?pid=341428&cid=43402


Global FX Weekly


Japan Interest Rate Expectation (Libor: 6m)2

Exhibit 1a. Japan – Accumulated change Exhibit 1b. Japan – Change between N-3 and N month

-25

0

25

50

75

100

0Y 1Y 2Y 3Y 4Y 5Y

Expected Rate Change: JPY *(Accumulated change by the N-month, bp)

12-Apr-12 (Latest) 1-week ago

1-month ago 3-month ago

-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 2Y 3Y 4Y 5Y

Expected Rate Change: JPY **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


Exhibit 1c. Japan – Quarterly breakdown of expected rate change

JPY Expected Rate Change, bp 3M 6M 9M 1Y 2Y 3Y 4Y 5Y

12-Apr-12 Accumulated change by the N month* 0 0 0 -1 -7 2 6 16 (Latest) Change in between** 0 0 0 -1 -6 9 3 10

1-week ago Accumulated change by the N month* -3 0 -1 -3 1 2 12 25

Change in between** -3 2 -1 -2 4 1 10 13

1-month ago Accumulated change by the N month* -3 -1 0 -3 -3 0 8 19

Change in between** -3 2 1 -3 0 3 8 11

3-month ago Accumulated change by the N month* 0 0 -1 -1 -2 -1 6 16

Change in between** 0 0 -1 0 -1 1 7 10

6M Libor: 0.34

Term premium/yr: 11bp


South Korea Interest Rate Expectation (CD: 3m)

Exhibit 2a. S.Korea – Accumulated change Exhibit 2b. S.Korea – Change between N-3 and N month

-75

-50

-25

0

25

50

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: KRW *(Accumulated change by the N-month, bp)



-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: KRW **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


2 The asterisks alongside the chart titles are for mapping the values plotted to the values entered in the corresponding table.


Global FX Weekly


KRW Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -4 -7 -10 -13 -16 -17 -17 -16 (Latest) Change between N-3 and N month** -4 -4 -2 -3 -3 -1 0 1

1-week ago Accumulated change by the N month* -2 -3 -5 -8 -11 -12 -11 -10

Change between N-3 and N month** -2 -2 -2 -3 -2 -1 1 1

1-month ago Accumulated change by the N month* -4 -7 -9 -13 -16 -17 -17 -17




3M CD: 3.54



Australia Interest Rate Expectation (Bank Bill: 3m)

Exhibit 3a. Australia – Accumulated change Exhibit 3b. Australia – Change between N-3 and N month

-125

-100

-75

-50

-25

0

25

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: AUD *(Accumulated change by the N-month, bp)



-75.0

-50.0

-25.0

0.0

25.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: AUD **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


AUD Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -26 -44 -53 -54 -49 -41 -34 -31 (Latest) Change between N-3 and N month** -26 -18 -9 -1 5 8 7 3


Change between N-3 and N month** -34 -14 -11 -1 6 7 8 2


Change between N-3 and N month** -32 -11 -10 -4 0 5 4 3


Change between N-3 and N month** -56 -27 -4 6 6 5 6 5

3M Bank Bill: 4.23




Global FX Weekly


New Zealand Interest Rate Expectation (Bank Bill: 3m)

Exhibit 4a. NZ– Accumulated change Exhibit 4b. NZ– Change between N-3 and N month

-25

0

25

50

75

100

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: NZD *(Accumulated change by the N-month, bp)



-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: NZD **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


NZD Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -4 -5 3 13 20 29 40 52 (Latest) Change between N-3 and N month** -4 -1 8 9 7 9 11 12

1-week ago Accumulated change by the N month* -3 -3 8 21 31 42 52 62

Change between N-3 and N month** -3 0 10 13 11 11 10 10

1-month ago Accumulated change by the N month* -1 0 9 22 32 42 51 60


3-month ago Accumulated change by the N month* -9 -14 -10 -4 -2 5 14 24

Change between N-3 and N month** -9 -6 4 6 3 6 10 10

3M Bank Bill: 2.75



China Interest Rate Expectation (7d-repo IRS: 3m)

Exhibit 5a. China – Accumulated change Exhibit 5b. China – Change between N-3 and N month

-125

-100

-75

-50

-25

0

25

50

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: CNY *(Accumulated change by the N-month, bp)



-75.0

-62.5

-50.0

-37.5

-25.0

-12.5

0.0

12.5

25.0

37.5

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: CNY **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago



Global FX Weekly


CNY Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -16 -26 -22 -24 -26 -22 -15 -6 (Latest) Change between N-3 and N month** -16 -10 4 -2 -1 3 8 9


Change between N-3 and N month** -9 -13 5 -5 -4 2 7 8




Change between N-3 and N month** -54 -17 -15 -7 -6 2 9 11

3M IRS: 3.41



Hong Kong Interest Rate Expectation (Hibor: 3m)

Exhibit 6a. HK – Accumulated change Exhibit 6b. HK – Change between N-3 and N month

-25

0

25

50

75

100

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: HKD *(Accumulated change by the N-month, bp)



-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: HKD **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


HKD Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -5 -8 -7 -6 -6 -3 1 4 (Latest) Change between N-3 and N month** -5 -3 1 1 0 2 4 3

1-week ago Accumulated change by the N month* -5 -9 -8 -7 -7 -3 4 11




3-month ago Accumulated change by the N month* -1 0 3 5 7 12 20 27


3M Hibor: 0.40




Global FX Weekly


Taiwan Interest Rate Expectation (CP: 3m)

Exhibit 7a. Taiwan – Accumulated change Exhibit 7b. Taiwan – Change between N-3 and N month

-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: TWD *(Accumulated change by the N-month, bp)



-25.0

-12.5

0.0

12.5

25.0

37.5

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: TWD **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


TWD Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* 5 10 11 10 11 12 14 15 (Latest) Change between N-3 and N month** 5 4 1 0 1 1 1 2

1-week ago Accumulated change by the N month* 7 12 12 10 9 10 12 15

Change between N-3 and N month** 7 5 0 -2 0 1 2 3

1-month ago Accumulated change by the N month* 4 7 5 2 0 0 2 4

Change between N-3 and N month** 4 3 -1 -4 -2 0 2 2

3-month ago Accumulated change by the N month* 1 2 0 -4 -7 -7 -4 -2

Change between N-3 and N month** 1 1 -2 -4 -3 0 2 3

3M CP: 0.82



India Interest Rate Expectation (MIBOR OIS: 3m)

Exhibit 8a. India – Accumulated change Exhibit 8b. India – Change between N-3 and N month

-250

-200

-150

-100

-50

0

50

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: INR *(Accumulated change by the N-month, bp)



-100.0

-75.0

-50.0

-25.0

0.0

25.0

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: INR **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago



Global FX Weekly


INR Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -67 -59 -69 -104 -130 -139 -129 -115 (Latest) Change between N-3 and N month** -67 8 -10 -35 -27 -8 10 14







3M OIS: 8.35



Malaysia Interest Rate Expectation (Klibor: 3m)

Exhibit 9a. Malaysia – Accumulated change Exhibit 9b. Malaysia – Change between N-3 and N month

-50

-25

0

25

50

75

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: MYR *(Accumulated change by the N-month, bp)



-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: MYR **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


MYR Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -2 -4 -5 -7 -9 -7 0 8 (Latest) Change between N-3 and N month** -2 -2 -1 -3 -2 3 7 8

1-week ago Accumulated change by the N month* -2 -3 -3 -5 -6 -4 1 5





Change between N-3 and N month** -16 -12 0 3 -1 2 4 4

3M Klibor: 3.19




Global FX Weekly


Singapore Interest Rate Expectation (SOR: 6m)

Exhibit 10a. SG – Accumulated change Exhibit 10b. SG – Change between N-3 and N month

-50

-25

0

25

50

75

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: SGD *(Accumulated change by the N-month, bp)



-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: SGD **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago


SGD Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* -5 -10 -13 -16 -17 -14 -8 -4 (Latest) Change between N-3 and N month** -5 -4 -3 -3 -1 4 5 4





3-month ago Accumulated change by the N month* -13 -22 -20 -13 -8 -2 5 11


6M SOR: 0.45



Thailand Interest Rate Expectation (FX Implied: 6m)

Exhibit 11a. Thailand – Accumulated change Exhibit 11b. Thailand – Change between N-3 and N month

-50

-25

0

25

50

75

0M 3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: THB *(Accumulated change by the N-month, bp)



-50.0

-37.5

-25.0

-12.5

0.0

12.5

25.0

37.5

50.0

3M 6M 9M 1Y 15M 18M 21M 2Y

Expected Rate Change: THB **(Change between N-3 and N month, bp)

12-Apr-12 (Latest)

1-week ago

1-month ago

3-month ago



Global FX Weekly


THB Expected Rate Change, bp 3M 6M 9M 1Y 15M 18M 21M 2Y

12-Apr-12 Accumulated change by the N month* 18 9 -2 23 40 47 48 52 (Latest) Change between N-3 and N month** 18 -10 -10 24 17 7 1 3

1-week ago Accumulated change by the N month* 24 15 7 30 48 56 60 65

Change between N-3 and N month** 24 -9 -8 23 18 9 3 5

1-month ago Accumulated change by the N month* 12 0 -4 12 23 24 18 12

Change between N-3 and N month** 12 -12 -5 17 11 1 -6 -6

3-month ago Accumulated change by the N month* 5 -29 -41 -21 -7 -5 -11 -16

Change between N-3 and N month** 5 -33 -13 20 14 2 -6 -5

FX Implied 6M: 2.89




Global FX Weekly



Asia Local Market Rates Liquidity Monitor 17

Introduction

In our bi-weekly Asia Local Market Rates Liquidity Monitor, we endeavour

to capture money market-specific flows, capital flows and key economic

data that may impact local rate markets. With an estimation of overall

liquidity conditions18

, the net flows we monitor allow us to gauge the

implications for money market liquidity.

The main components in our liquidity monitor include:

Open market operations

Issuance

Coupon payments

Redemption of government and corporate securities.

Other market components in our liquidity monitor include:

Public offerings

Changes in foreign holdings of equity and debt

Government spending – central government‟s deposits with the central

bank

Reserve requirement maintenance status.

We also include key economic indicators in this report:

External commercial borrowing (India)

FX reserve changes

Broad money growth

Loan/deposit ratio

Inflation.

Lastly, we also monitor seasonal factors that have historically affected

money market liquidity, such as large equity dividend payments and tax

payments.

17) We define overall liquidity in each market as the total outstanding of short-term debt securities. For South Korea, we take call market borrowing, CDs, bills, MSBs, repos/reverse repos, beneficial certificates and short-term financial debentures. This will reflect the total volume of short-term borrowing/lending in the market.

Simon Flint

+65-6433-6105 [email protected]

Craig Chan +65-6433-6106

[email protected]

Wee Choon Teo +65-6433-6107

[email protected]

Kewei Yang +65-6433-6246

[email protected]

Prateek Gupta +65-6433-6197

[email protected]

Prashant Pande +65-6433-6198

[email protected]


Global FX Weekly

Source: RBI, IMF, CEIC, Bloomberg, Nomura

Aggregate net inflows in both OMOs and the bond market totalled INR8.4trn from 29 Mar to 11 Apr 2012.

Over the past two weeks (29 Mar to 11 Apr 2012), net foreign equity holdings have decreased by USD225mn and net foreign debt holdings have fallen by

USD205mn.

(INR bn)

Date Weekday 1st LAF 2nd LAF

Special

LAF

LAF

Matured SubTotal

Total

(Weekly)

Govt

Auction

Corp

Auction

Govt

Cpn

Corp

Cpn

Govt

Redemption

Corp

Redemption SubTotal

Total

(Weekly) SubTotal

Total

(Weekly) EQ DT SubTotal

Total

(Weekly)

3/29/2012 THU 1,610 1,610 2 1 35 1 39 -254 -213 -467

3/30/2012 FRI 1,248 727 1,975 1 4 145 2 152

3/31/2012 SAT -336 -336 1 5 12 18

4/1/2012 SUN 1 37 37

4/2/2012 MON 0 0 -0.99 254 -250 4

4/3/2012 TUE 1,354 1,354 -180 -180 73 47 120

4/4/2012 WED 483 304 786 5,389 -140 0 1 -139 -73 -0.99 26 48 74 -269

4/5/2012 THU 13 260 3 275

4/6/2012 FRI 2 97 99

4/7/2012 SAT 1,066 0 1,066 1 0 1

4/8/2012 SUN 3 0 3 6

4/9/2012 MON 6 0 0 7 -49 217 167

4/10/2012 TUE 909 909 -8 1 0 -6 -203 -8 -211

4/11/2012 WED 842 842 2,817 -140 52 -88 293 0.00 -72 -46 -118 -161

4/12/2012 THU 865 865 26 0 5 31

4/13/2012 FRI 3 0 109 112

4/14/2012 SAT 0 0

4/15/2012 SUN 2 8 10

4/16/2012 MON 46 0 2 48

4/17/2012 TUE 1 0 1

4/18/2012 WED 865 -140 0 0 3 -137 66 0.00 0

4/19/2012 THU 8 0 30 0 39

4/20/2012 FRI 8 0 70 2 80

4/21/2012 SAT 1 0 1 2

4/22/2012 SUN 28 0 4 32

4/23/2012 MON 4 1 12 4 21

4/24/2012 TUE 0 0 0

4/25/2012 WED 0 -140 0 3 -137 36 0.00 0

4/26/2012 THU 0 0

4/27/2012 FRI 5 1 160 3 169

4/28/2012 SAT 2 0 0 2

4/29/2012 SUN 2 1 2

4/30/2012 MON 5 2 12 18

5/1/2012 TUE 0 0 1

5/2/2012 WED 0 -150 1 -149 43 0.00 0

5/3/2012 THU 51 0 330 2 383

5/4/2012 FRI 0 1 142 2 145

5/5/2012 SAT 1 1 4 6

5/6/2012 SUN 1 1 0 2

5/7/2012 MON 1 1 2

5/8/2012 TUE 28 28

5/9/2012 WED 0 -140 3 0 -137 429 0.00 0

Local Market Liquidity: IndiaIssuance/CpnPayment/RedemptionOMOs

Change of Foreign Holdings

USD mnPublicOfferings


Global FX Weekly

Source: RBI, IMF, CEIC, Bloomberg, Nomura

India‟s liquidity position eased by INR405bn in February 2012.

Headline FX reserves decreased by USD0.5bn m-o-m in March. Adjusting for FX changes and coupons, reserves fell by USD0.3bn.

Real GDP grew by 6.3% y-o-y in Q4 2011, compared with 6.7% in Q3 2011.

WPI inflation increased to 7% y-o-y in February 2012 from 6.6% in January 2011.

INR

1M 2M 3M 4M 5M 6M

Liquidity Position (INR bn) Feb-12 7,189 6,784 6,648 9,305 6,719 6,793 7,129

Chg 405 136 -2,657 2,586 -74 -336 37

FX reserve (USD bn) Mar-12 260 261 259 263 273 282 276

Chg, mom -0.5 1.7 -4.1 -9.8 -9.3 6.4 -10.3

(Adjusted for FX changes & coupon payments) Chg, mom -0.3 1.2 -5.1 -7.2 -7.0 3.6 -4.6

FX Forward Outstanding (USD mn) - Net Long Position Feb-12 -1453 -1323 -1370 -1620 0 0 0

Chg -130 47 250 -1620 0 0 0

Central Govt deposit in central bank (net; Rs. Crore.) Mar-12 48,951 101 101 100 100 100 101

Chg, mom 48,850 0 1 0 0 -1 0

Loan/Deposit Ratio Feb-12 76 76 75 75 74 74 74

Monetary Supply (M3) Pct Chg (mom) Mar-12 1.7% 0.9% -0.5% 2.6% 0.7% 1.4% 0.4%

Pct Chg (yoy) Mar-12 13.0% 13.5% 14.4% 15.6% 15.2% 14.6% 16.4%

Inflation - WPI (mom) Feb-12 0.4% 0.3% -0.1% 0.3% 0.5% 0.8% 0.5%

(qoq) Feb-12 0.6% 0.4% 0.7% 1.6% 1.8% 2.0% 1.6%

(yoy) Feb-12 7.0% 6.6% 7.7% 9.5% 9.9% 10.0% 9.8%

- Excl. food (mom) Feb-12 2.1% 2.0% 1.5% -1.0% -3.0% 1.2% 3.2%

(qoq) Feb-12 5.7% 2.5% -2.6% -2.9% 1.2% 1.6% -0.7%

(yoy) Feb-12 -2.6% 0.6% 1.8% 3.4% 7.4% 14.6% 18.2%

Foreign Equity Holdings (M; net; USD mn) Mar-12 1,685 5,128 2,037 31 -787 347 7

Foreign Debt Holdings (M; net; USD mn) Mar-12 -1,298 2,037 3,049 4,163 201 288 -349

Foreign Equity Holdings (M; net; Rs. Crore.) Mar-12 8,381 25,212 10,358 98 -4,198 1,677 -158

Foreign Debt Holdings (M; net; Rs. Crore.) Mar-12 -6,589 10,016 15,971 21,775 935 1,401 -1,707

ECB, USD bn Feb-12 2.60 2.70 4.47 1.59 2.48 2.36 3.71

Chg, mom -0.10 -1.77 2.88 -0.89 0.11 -1.35 -0.46

1W 2W 3W 4W 5W 6W

Central Govt deposit in central bank (net; Rs. Crore.) 30-Mar-12 48,951 66,529 71,031 101 101 101 101

Chg, wow -17,578 -4,502 70,930 0 0 0 0

1Q 2Q 3Q 4Q 5Q 6Q

Growth (Q) - real GDP (qoq) Dec-11 9.9% -0.2% -10.7% 8.5% 10.3% 1.5% -11.4%

(yoy) Dec-11 6.3% 6.7% 8.5% 7.7% 10.1% 8.9% 9.5%

1Y 2Y 3Y 4Y 5Y 6Y

Credit outstanding - non-food sector (INR tn) 2011 37 30 26 22 18 14 10

Chg, yoy 6 4 4 4 4 4 3

Current CRR Latest 6.00% (effective since 4/24/10, previous ratio at 5.75%)

Reserve maintenance/required reserve 4/9/2012 103% Avg. Reserve Maintenance from 4/7/12 to 4/9/12: 101%

(Latest) 2-week maintenance cycle ends on 4/20/12 (4/7/11-4/20/12)

Note: There are regular quarterly tax payments (Mar 15, Jun 15, Sep 15 and Dec 15). * The data only reflects information known by the time of update.

Prior historical dataUp-to-date data

Economic Data Summary: India


Global FX Weekly

Source: BoK19

, MoFE, Reuters, Bloomberg, CEIC, Nomura

Aggregate net inflows from both OMOs and the bond market totalled KRW12.1trn from 29 Mar to 11 Apr 2012.

KTB auctions in April 2011: KRW1.4trn 3yr KTB auctioned on 2 April, KRW1.8trn 5yr KTB auctioned on 9 April, KRW1.6trn 10yr KTB auctioned on 16 April and

KRW1.0trn 20yr KTB auctioned on 23 April.

- The bid/cover ratios for the April auctions were 4.44-4.80x compared with 4.40-4.80x for March.

Foreign equity holdings have increased by USD579mn over the past two weeks.

19) MSB regular issuance to be announced on Fridays and auctioned on the following Monday; regular repo auctions are to be held on Thursdays.

(KRW bn)

Date Weekday

MSB

Issuance

Repos

Net Flow SubTotal

Total

(Weekly)

Govt

Auction

Corp

Auction

Govt

Cpn

Corp

Cpn

Govt

Redemption

Corp

Redemption SubTotal

Total

(Weekly) SubTotal

Total

(Weekly) EQ

Total

(Weekly)

3/29/2012 THU -2,091 30 107 100 215 -1,639 31

3/30/2012 FRI -1,197 12 110 440 884 249 33

3/31/2012 SAT 219 44 1,143 332 1,737

4/1/2012 SUN 19 30 520 680 1,249

4/2/2012 MON -1,830 -1,830 -1,400 -90 387 21 7,597 441 6,956 -13

4/3/2012 TUE -100 10 7 2,200 162 2,279 224

4/4/2012 WED -1,830 -100 3 37 95 35 10,865 0.0 195 470

4/5/2012 THU -610 9 50 450 -101 -1

4/6/2012 FRI -480 14 48 100 1,287 969 226

4/7/2012 SAT 9 73 300 490 872

4/8/2012 SUN 13 84 380 477

4/9/2012 MON -2,140 -2,140 -1,800 -453 89 36 2,780 610 1,262 -49

4/10/2012 TUE -140 15 14 1,200 202 1,291 -67

4/11/2012 WED -2,140 3 42 384 429 5,199 0.0 109

4/12/2012 THU -1,504 13 86 100 858 -448 -66 -320

4/13/2012 FRI -650 23 78 250 897 598

4/14/2012 SAT 22 52 380 454

4/15/2012 SUN 31 61 642 734

4/16/2012 MON -1,600 -70 45 31 200 537 -857

4/17/2012 TUE -150 36 39 3,174 87 3,186

4/18/2012 WED 0 500 -190 40 51 50 180 631 4,299 -65.5 -320

4/19/2012 THU -400 -240 24 69 162 -386

4/20/2012 FRI -507 29 64 253 -161

4/21/2012 SAT 30 66 330 151 578

4/22/2012 SUN 10 71 143 223

4/23/2012 MON -1,000 -490 17 41 130 61 -1,241

4/24/2012 TUE -100 16 28 100 200 244

4/25/2012 WED 0 -30 13 79 120 183 -560 0.0 0

4/26/2012 THU 12 67 2,251 218 2,548

4/27/2012 FRI 17 120 230 726 1,092

4/28/2012 SAT 25 133 390 543 1,091

4/29/2012 SUN 15 135 50 2,053 2,253

4/30/2012 MON 431 85 1,741 710 2,966

5/1/2012 TUE 7 23 1,220 1,250

5/2/2012 WED 0 -5 384 53 120 552 11,752 0.0 0

5/3/2012 THU 7 68 120 22 218

5/4/2012 FRI 22 62 1 385 470

5/5/2012 SAT 6 38 160 204

5/6/2012 SUN 19 63 40 217 338

5/7/2012 MON 17 51 190 662 920

5/8/2012 TUE 5 76 1,700 777 2,557

5/9/2012 WED 0 107 118 3,120 470 3,815 8,522 0.0 0

Local Market Liquidity: S. KoreaChange of Foreign Holdings

USD mnPublicOfferingsOMOs Issuance/CpnPayment/Redemption


Global FX Weekly

Source: BoK, MoFE, Reuters, Bloomberg, CEIC, Nomura

Headline FX reserves increased by USD0.1bn m-o-m in March. On an adjusted basis, FX reserves increased by USD0.3bn m-o-m.

M2 growth decreased to 4.9% y-o-y in February from 5.0% in January 2012.

FX forward net long position was unchanged in February from January.

CPI inflation decreased to 2.6% in March from 3.1% y-o-y in February.

Real GDP grew by 3.4% y-o-y in Q4 2011, compared with 3.6% in Q3 2011.

KRW

1M 2M 3M 4M 5M 6M

Liquidity Position (KRW tn) Feb-12 411 414 417 424 421 422 423

Chg -3 -3 -7 3 -1 -1 2


Chg, mom 0.1 4.5 4.9 -2.2 -2.3 7.6 -8.8

(Adjusted for FX changes & coupon payments) Chg, mom 0.3 3.9 3.8 0.7 0.2 4.5 -2.5

FX Forward Outstanding (USD mn) - Net Long Position Feb-12 32454 32454 35568 35172 38160 47004 51920

Chg 0 -3114 396 -2988 -8844 -4916 -1522

Govt deposit in central bank (net; KRW tn) Feb-12 1.3 3.5 7.4 2.9 3.9 3.2 3.1

Chg -2.1 -3.9 4.4 -0.9 0.6 0.1 0.4


Monetary Supply (sa; new M2) Pct Chg (mom) Feb-12 0.1% 0.5% 0.4% 0.1% 0.4% 1.1% 0.0%

(yoy) Feb-12 4.9% 5.0% 5.2% 4.1% 4.6% 4.2% 3.6%

Inflation (sa) - CPI (mom) Mar-12 -0.1% 0.4% 0.5% 0.4% 0.1% -0.2% 0.1%

(qoq) Mar-12 0.8% 1.2% 1.0% 0.3% -0.2% 0.8% 1.7%

(yoy) Mar-12 2.6% 3.1% 3.4% 4.2% 4.2% 3.9% 4.3%

1Q 2Q 3Q 4Q 5Q 6Q

Growth (sa; Q) - real GDP (qoq) Dec-11 0.3% 0.8% 0.8% 1.3% 0.6% 0.7% 1.4%

(yoy) Dec-11 3.4% 3.7% 3.5% 4.0% 5.0% 4.5% 7.4%

Foreign Equity Holdings (Q; net; USD bn) Dec-11 213 199 252 245 235 196 164

Chg, qoq 14 -53 7 10 39 33 -13

Foreign Debt Holdings (Q; net; USD bn) Dec-11 162 158 151 143 142 142 135

Chg, qoq 4 7 7 2 0 6 6

Note: March and April are equity dividend season in Korea. * The data only reflects information known by the time of update.

Economic Data Summary: S. KoreaPrior historical dataUp-to-date data


Global FX Weekly

Source: BNM20

, Bloomberg, CEIC, Nomura

Aggregate net outflows in both OMOs and the bond market totalled MYR823mn from 29 Mar to 11 Apr 2012.

The changes in the banking system‟s liquidity position are largely because of private sector bond issuance, payments and redemptions as the impact of the

government‟s market activities has been neutralised by BNM.

20) Note: BNM conducts regular operations (money market tenders: ~4 times each day) to mop up liquidity released from the government. Related liquidity components include, a) BNM MM and repo, b) other BNM market and non-market activities, c) government operations, d) BNM and govt. securities redemption/(issuance), e) coupon and dividend payments, and f) statutory reserves. Source: Bank Negara Malaysia (BNM) (https://fast.bnm.gov.my/).

(MYR mn)

Date Weekday SubTotal

Total

(Weekly)

Corp

Auction

Corp

Cpn

Corp

Redemption SubTotal

Total

(Weekly) SubTotal

Total

(Weekly)

3/29/2012 THU -1,849 21 47 68

3/30/2012 FRI -6 136 463 599

3/31/2012 SAT

4/1/2012 SUN

4/2/2012 MON 0 -70 3 260 193

4/3/2012 TUE -38 3 3

4/4/2012 WED 4 -1,889 -200 1 -199 664 0.0

4/5/2012 THU 116 61 65 126

4/6/2012 FRI -120 5 55 60

4/7/2012 SAT

4/8/2012 SUN

4/9/2012 MON 12 -290 78 395 183

4/10/2012 TUE 31 -60 46 -14

4/11/2012 WED 39 8 8 363 0.0

4/12/2012 THU -11 101 840 930

4/13/2012 FRI -95 134 1,017 1,056

4/14/2012 SAT

4/15/2012 SUN

4/16/2012 MON 63 111 174

4/17/2012 TUE 19 15 34

4/18/2012 WED 0 2 10 12 2,206 0.0

4/19/2012 THU 6 6

4/20/2012 FRI 36 213 249

4/21/2012 SAT

4/22/2012 SUN

4/23/2012 MON 57 280 337

4/24/2012 TUE 35 30 65

4/25/2012 WED 0 26 26 684 0.0

4/26/2012 THU 3 33 36

4/27/2012 FRI 49 130 179

4/28/2012 SAT

4/29/2012 SUN

4/30/2012 MON 500 410 910

5/1/2012 TUE

5/2/2012 WED 0 15 120 135 1,260 0.0

5/3/2012 THU 27 27

5/4/2012 FRI 13 200 213

5/5/2012 SAT

5/6/2012 SUN

5/7/2012 MON 112 215 327

5/8/2012 TUE 26 45 71

5/9/2012 WED 0 54 472 526 1,165 0.0

PublicOfferingsIssuance/CpnPayment/Redemption (Corp)Chg of Liquidity Position (BNM)

Local Market Liquidity: Malaysia


Global FX Weekly

Source: BNM, Bloomberg, CEIC, Nomura

Headline FX reserves increased by USD1.0bn in March. On an adjusted basis, FX reserves increased by USD1.0bn.

FX forward net long positions increased by USD745mn in February.

Inflation on a year-on-year basis in February was 2.2%, decreasing from 2.7% in January.

Real GDP growth was 5.2% y-o-y in Q4 2011, compared with 5.8% in Q3 2011.

MYR

1M 2M 3M 4M 5M 6M

Liquidity Position (MYR bn) Feb-12 32 30 28 28 27 28 29

Chg, mom 2 3 0 1 -1 -1 0


Chg, mom 1.0 0.6 0.4 -1.1 0.0 3.8 -5.3

(Adjusted for FX changes & coupon payments) Chg, mom 1.0 0.5 0.0 0.0 1.1 2.6 -2.6

FX Forward Outstanding (USD mn) - Net Long Position Feb-12 7595 6850 6600 7500 7270 12700 15055

Chg 745 250 -900 230 -5430 -2355 -265

Fed Govt deposit in central bank (net; MYR bn) Mar-12 11 8 8 11 25 19 15

Chg, mom 4 -1 -3 -15 7 4 -13

Loan/Deposit Ratio Dec-11 80.9 81.8 82.5 81.9 82.9 82.2 81.8

Monetary Supply (M2) Pct Chg (mom) Feb-12 0.5% 2.2% 2.5% 2.3% -0.4% 2.6% 0.5%

Pct Chg (yoy) Feb-12 16.0% 14.7% 14.5% 12.7% 11.8% 13.0% 10.8%

Inflation -CPI (mom) Feb-12 0.0% 0.3% 0.1% 0.1% 0.2% 0.2% 0.2%

(qoq) Feb-12 1.5% 1.9% 1.5% 1.9% 2.3% 2.3% 2.7%

(yoy) Feb-12 2.2% 2.7% 3.0% 3.3% 3.4% 3.4% 3.3%

Foreign Debt Holdings (net; MYR bn) Feb-12 183 177 164 169 172 167 186

Chg, mom 6 13 -5 -2 4 -19 0

1Q 2Q 3Q 4Q 5Q 6Q

Growth (Q) - real GDP (qoq) Dec-11 1.2% 3.8% 2.8% -2.5% 1.7% 2.3% 3.8%

(yoy) Dec-11 5.2% 5.8% 4.3% 5.2% 4.8% 5.3% 9.0%

1Y 2Y 3Y 4Y 5Y 6Y

Foreign Equity Holdings (annual; net; MYR bn) 2010 126 74 55 184 143 109 115

Chg, yoy 52 18 -129 41 34 -7 40

Foreign Debt Holdings (annual; net; MYR bn) 2010 160 121 111 107 61 49 69

Chg, yoy 38 10 4 46 11 -19 66

Note: * The data only reflects information known by the time of update.

Up-to-date data Prior historical data

Economic Data Summary: Malaysia


Global FX Weekly

Source: CBC, MoF Taiwan, Bloomberg, CEIC, Nomura

Aggregate net inflows from both OMOs and the bond market totalled TWD65bn from 29 Mar to 11 Apr 2012.

Bond auctions in Q2 2012: TWD40bn 5yr (101A1) on 10 April, TWD40bn 20yr (101A2) on 24 April, TWD35bn 30yr (101A4) on 30 April, TWD30bn 10yr (101B2)

on 21 May and TWD40bn 10yr (101A5) on 22 June.

Foreign equity holdings have decreased by USD894mn in the past two weeks.

(TWD bn)

Date

CDs

Matured

CDs

Issued

Sub-

Total

Total

(Weekly)

Govt

Auction

Corp

Auction

Govt

Cpn

Corp

Cpn

Govt

Redemption

Corp

Redemption

Sub-

Total

Total

(Weekly)

Sub-

Total

Total

(Weekly) EQ

Total

(Weekly)

3/29/2012 THU 9.5 -18.2 -8.7 0.1 0.1 67

3/30/2012 FRI 191.5 191.5 -5.4 0.2 5.0 -0.1 -55

3/31/2012 SAT 159.4 159.4 1.4 0.0 0.1 1.5

4/1/2012 SUN 337.4 337.4

4/2/2012 MON 258.3 258.3 -77

4/3/2012 TUE 7.3 7.3 0.0 0.0 204

4/4/2012 WED 341.1 341.1 1286.2 1.5 0.0 138.9

4/5/2012 THU 93.1 93.1 -1.3 -1.3 -68

4/6/2012 FRI 370.6 370.6 27.0 27.0 -414

4/7/2012 SAT 212.4 212.4 0.0 0.0 0.0

4/8/2012 SUN 194.0 194.0

4/9/2012 MON 120.5 120.5 0.1 0.1 -250

4/10/2012 TUE 55.5 55.5 -40 -4.0 0.1 -43.9 -108

4/11/2012 WED 482.7 482.7 1528.7 0.0 0.0 -18.1 0.0 -193 -1033.2

4/12/2012 THU 164.6 164.6 0.3 0.3 -234

4/13/2012 FRI 509.0 509.0

4/14/2012 SAT 196.1 196.1

4/15/2012 SUN 235.9 235.9 0.3 0.3

4/16/2012 MON 60.9 60.9 -0.2

4/17/2012 TUE 17.1 17.1 0.1 0.6 0.7 -1.2

4/18/2012 WED 276.0 276.0 1459.5 0.5 0.5 1.7 -1.4 -234.1

4/19/2012 THU 47.1 47.1 0.0 0.0

4/20/2012 FRI 121.7 121.7 0.1 0.1

4/21/2012 SAT 78.2 78.2 2.0 0.1 2.1

4/22/2012 SUN 67.7 67.7 0.5 0.6 1.1

4/23/2012 MON 7.7 7.7 2.1 0.3 0.3 2.7

4/24/2012 TUE 2.7 2.7 -40 0.3 -39.7

4/25/2012 WED 58.5 58.5 383.5 0.2 0.2 -33.5 0.0 0.0

4/26/2012 THU 33.4 33.4 0.0 0.0

4/27/2012 FRI 28.5 28.5 0.1 0.1

4/28/2012 SAT 15.9 15.9 0.3 0.3 0.6

4/29/2012 SUN 12.4 12.4 0.2 0.2 0.3

4/30/2012 MON 17.0 17.0 -35 0.2 25.0 3.2 -6.7

5/1/2012 TUE 24.6 24.6 0.0 0.0

5/2/2012 WED 20.2 20.2 151.9 0.0 0.2 0.2 -5.5 0.0 0.0

5/3/2012 THU 22.7 22.7 0.0 0.2 0.2

5/4/2012 FRI 20.0 20.0 0.0 0.0

5/5/2012 SAT 0.0 0.2 0.2

5/6/2012 SUN 0.0 0.2 0.2

5/7/2012 MON 140.9 140.9 0.2 0.1 5.4 5.7

5/8/2012 TUE 23.1 23.1 1.4 0.0 0.2 1.6

5/9/2012 WED 23.4 23.4 230.1 0.2 5.2 5.3 13.1 0.0 0.0

Local Market Liquidity: TaiwanPublicOfferingsIssuance/CpnPayment/Redemption

Chg of Foreign

HoldingsOMOs


Global FX Weekly

Source: CBC, MoF Taiwan, Bloomberg, CEIC, Nomura

Headline FX reserves decreased by USD0.6bn m-o-m in March. On an adjusted basis, FX reserves decreased by USD0.3bn

m-o-m.

Government deposits with the central bank increased by NTD16bn in March.

CPI inflation increased to 1.2% y-o-y in March from 0.2% in February.

Real GDP growth decreased to 1.9% y-o-y in Q4 2011 from 3.4% y-o-y in Q3 2011.

TWD

1M 2M 3M 4M 5M 6M

Liquidity Position (TWD bn) Feb-12 1,815 1,754 1,705 1,771 1,635 1,670 1,612

Chg, mom 61 49 -66 136 -35 58 -56


Chg, mom -0.6 4.1 4.8 -2.4 -5.4 4.2 -11.1

(Adjusted for FX changes & coupon payments) Chg, mom -0.3 3.4 3.3 1.3 -2.1 0.2 -3.0

Govt deposit in central bank (net; NTD bn) Mar-12 166 150 179 182 199 198 251

Chg, mom 16 -29 -2 -17 1 -53 31


Monetary Supply (M2) Pct Chg (mom) Mar-12 1.5% 1.5% 0.1% 4.0% 1.7% 1.5% 0.0%

Pct Chg (yoy) Mar-12 19.9% 18.3% 19.7% 20.5% 20.6% 22.4% 23.3%

Inflation - CPI (mom) Mar-12 0.1% -1.3% 0.3% 0.2% 0.0% 0.5% 0.1%

(qoq) Mar-12 -3.8% -3.2% 2.0% 2.9% 2.6% 2.8% -0.6%

(yoy) Mar-12 1.2% 0.2% 2.4% 2.0% 1.0% 1.3% 1.4%

- Excl. food (mom) Mar-12 0.1% -1.0% 0.7% -0.3% -0.1% 0.5% -0.2%

(qoq) Mar-12 -1.2% -2.6% 1.1% 0.3% 0.7% 0.0% -2.2%

(yoy) Mar-12 0.5% -0.5% 1.5% 0.7% 1.0% 1.3% 1.2%

1Q 2Q 3Q 4Q 5Q 6Q

Growth (Q) - real GDP (qoq) Dec-11 1.8% 3.5% 3.4% -6.5% 3.3% 4.5% 5.5%

(yoy) Dec-11 1.9% 3.4% 4.5% 6.6% 6.5% 11.2% 13.0%

Foreign Equity Holdings (Q; net; USD bn) Dec-11 -1.1 -19.5 8.7 -1.0 10.9 -0.8 7.4

Chg, qoq 18.4 -28.1 9.7 -11.9 11.6 -8.1 2.6

Foreign Debt Holdings (Q; net; USD bn) Dec-11 -1.9 1.5 9.5 7.1 9.7 8.3 2.6

Chg, qoq -3.4 -8.1 2.4 -2.6 1.4 5.7 -0.8

1Y 2Y 3Y 4Y 5Y 6Y

Foreign Equity Holdings (annual; net; USD bn) 2010 89 80 34 71 94 88 49

Chg, yoy 9 46 -37 -23 6 39 16

Foreign Debt Holdings (annual; net; USD bn) 2010 -155 -128 -113 -104 -102 -93 -70

Chg, yoy -27 -15 -8 -3 -8 -23 -17

Note: August is equity dividend season in Taiwan. * The data only reflects information known by the time of update.

Up-to-date data Prior historical data

Economic Data Summary: Taiwan



Global FX Weekly

Global FX Forecasts

FX Forecasts

12-Apr Q2 12 Q3 12 Q4 12 Q1 13 End 2013

G10

US Dollar Index (DXY) 79.4 79.6 80.9 82.5 83.4 85.3

Japanese yen (USD/JPY) 81.0 80.0 83.0 85.0 86.0 90.0

(EUR/JPY) 107 102 104 105 105 108

Euro (EUR) 1.32 1.28 1.25 1.23 1.22 1.20

Sw iss Franc (CHF) 0.91 0.94 0.96 0.98 0.98 1.00

(EUR/CHF) 1.20 1.20 1.20 1.20 1.20 1.20

British Pound (GBP) 1.60 1.56 1.54 1.54 1.53 1.54

(EUR/GBP) 0.83 0.82 0.81 0.80 0.80 0.78

Australian Dollar (AUD) 1.04 1.03 1.05 1.05 1.05 1.05

Canadian Dollar (CAD) 1.00 0.98 0.97 0.95 0.95 0.95

New Zealand Dollar (NZD) 0.83 0.83 0.85 0.87 0.87 0.88

Norw egian Krone (EUR/NOK) 7.60 7.60 7.50 7.40 7.40 7.40

Sw edish Krona (EUR/SEK) 8.89 9.00 8.90 8.80 8.78 8.70

Asia

Chinese Renminbi (CNY) 6.31 6.18 6.17 6.15 6.11 6.00

Hong Kong Dollar (HKD) 7.76 7.75 7.75 7.75 7.75 7.75

Indonesian Rupiah (IDR) 9182 8800 8700 8600 8500 8200

Indian Rupee (INR) 51.6 48.5 47.9 47.2 46.8 45.5

Korean Won (KRW) 1140 1120 1110 1090 1080 1050

Malaysian Ringgit (MYR) 3.07 2.96 2.95 2.93 2.90 2.82

Philippine Peso (PHP) 42.7 42.0 41.7 41.3 41.0 40.0

Singapore Dollar (SGD) 1.25 1.23 1.22 1.20 1.19 1.15

Thai Baht (THB) 30.8 30.3 30.2 30.0 29.8 29.0

Taiw an Dollar (TWD) 29.5 29.4 29.3 29.1 28.8 28.0

Europe and Africa

Czech Koruna (EUR/CZK) 24.8 25.5 25.5 25.0 24.9 24.5

Hungarian Forint (EUR/HUF) 296 295 295 290 289 285

Polish Zloty (EUR/PLN) 4.16 4.70 4.40 4.10 4.05 3.90

Israeli Shekel (ILS) 3.75 3.70 3.68 3.65 3.61 3.50

Russian Ruble (RUB) 29.4 30.0 29.8 29.6 29.5 29.0

Turkish Lira (TRY) 1.80 1.74 1.72 1.70 1.70 1.70

South African Rand (ZAR) 7.88 8.50 8.00 7.25 7.44 8.00

Latin America

Brazilian Real (BRL) 1.83 1.80 1.75 1.70 1.69 1.65

Chilean Peso (CLP) 483 500 480 475 471 460

Mexican Peso (MXN) 13.07 12.60 12.20 12.00 11.80 11.50

Colombian Peso (COP) 1781 1840 1830 1825 1806 1750

Argentine peso (ARS) 4.39 4.52 4.69 4.90 5.09 5.65

Note: Forecasts are for end of quarter




Global FX Weekly

April 12, 2012

CONTACTS

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Yujiro Goto (Vice President)


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AEJ Rates Research [email protected] +65 6433 6555

Kewei Yang (Vice President)

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Vivek Rajpal (Vice President)

AEJ Rates Research [email protected] +91 22 403 74438

Martin Whetton (Vice President)

AEJ Rates Research [email protected] +61 2 8062 8611

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FOREIGN EXCHANGE RESEARCH TOKYO

Yunosuke Ikeda (Executive Director) G10 Research [email protected] +81 3 6703 3885

Masanari Takada G10 Research [email protected] +81 3 6703 3889

Shinya Harui G10 Research [email protected] +81 3 6703 3884

Kota Hirayama G10 Research [email protected] +81 3 6703 3887



Global FX Weekly

April 12, 2012



Global FX Weekly

April 12, 2012

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