USD/IDR – Rupiah Strengthens As US Data Saw Dollar Lower.
- USD/IDR is down at 15,907 in Jakarta morning; versus yesterday's close of 15,930.
- Free of all key technical levels, the Rupiah’s move down today sees its approach towards 16,000 stall.
- Bloomberg Asia dollar spot index is up by +0.02% at the open and the Bloomberg Dollar spot index is +0.02% higher.
- USD/IDR one-month implied volatility is down this morning to 6.5675%, versus 6.59% yesterday’s close.
- Indonesia's 10-year bond yield is at 6.912%
- Indonesia 5 yr USD CDS at 71bps (Friday close 72bp, 5-year low 38bps in 2020).
Headlines
- National Economic Council warns of rupiah risks from more US protectionism (source: Jakarta Post).
- Room for interest rate cuts seen to narrow in 2025 thanks to Trump protectionism (source: Jakarta Post).
Data November 06, 2024.
- Foreign Reserves for November (prior US$151.0bn).
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CHINA: Proposals for Refinancing of Local Government Debt.
• National People’s Congress Standing Committee discussed on Monday an option to increase the debt ceiling for local governments to allow ‘hidden’ off balance sheet debts to be refinanced on balance sheet (per BBG).
• The International Monetary Fund estimates there is approximately CNY60tn (US$8.5tn) of hidden debt from local authorities.
• Finance minister Lan Fo’an announced last month that China would soon launch its largest ever program to address the local debt issue.
• Suggestions are that anywhere from CNY6tn to CNY10tn of new issuance may be approved this week by the National Party Congress.
• There are suggestions that this alleviates the financial burden for local governments, but that appears to miss the point.
• Bringing off balance sheet debt on balance sheet will raise the official debt levels and challenge the debt ceiling.
• Raising the debt ceiling will allow further (on balance sheet) issuance which will help alleviate the fiscal pressure created by the slowdown in the property market. This may still be seen as positive for short to medium term economic momentum.
• As well, the NPC is expected to provide further details on what financial resources are available for further stimulus, and where it will be targeted.
• As is normal with the NPC, it will be light on in detail as that follows thereafter.
FOREX: Overnight Vol Surges For USD/CNH & USD/MXN Ahead Of US Election
Implied FX vols in the overnight space have surged today to reflect US election risk. The table below outlines the current implied vols across the G10 FX pairs and for a number of EM currencies, which are seen risk around the US election outcome. It also plots the implied ranges for the next day, based off these implied vol levels.
- USD/MXN clearly stands out, at very elevated levels. This isn't at intra-day record highs, which got near 100% in 2008 (during the GFC), per Bloomberg.
- USD/CNH overnight vol is also very elevated and also implies a very wide range in terms of spot, 7.0388-7.1841, with a near 74% implied probability.
- For other pairs we at elevated levels, but at that this stage, not at record highs for the likes of AUD/USD and NZD/USD.
Table 1: Overnight FX Vols & Implied FX Ranges
| 1 day Implied Vol (%) | Implied Range | |
| USD/CNH | 30.56 | 7.0388-7.1841 |
| USD/JPY | 28.615 | 150.60-153.64 |
| USD/MXN | 93.38 | 19.77-20.45 |
| EUR/USD | 28.06 | 1.0798-1.0961 |
| GBP/USD | 17.9 | 1.2862-1.3054 |
| USD/CHF | 19.1 | 0.8577-0.8703 |
| USD/NOK | 33.93 | 10.89-11.116 |
| USD/SEK | 30.26 | 10.621-1.824 |
| AUD/USD | 34.885 | 0.6520-0.6650 |
| NZD/USD | 33.125 | 0.5889-0.6055 |
| USD/CAD | 16.95 | 1.3818-1.3945 |
Source: MNI - Market News/Bloomberg
- Also note the following option expiry pipeline for NY cut (later today).
- FX OPTIONS: Expiries for Nov05 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0830-50(E1.6bln), $1.0900(E1.3bln), $1.0915-30(E727mln), $1.0940-60(E1.5bln)
- USD/JPY: Y152.00($826mln), Y152.50($1.0bln), Y153.20-25($621mln), Y153.65($751mln)
- GBP/USD: $1.3000(Gbp523mln), $1.3115-30(Gbp1.0bln)
- AUD/USD: $0.6530-40(A$533mln), $0.6600-10(A$1.8bln)
CHINA: CAIXIN PMI Services Stronger for October.
- Today’s CAIXIN PMI Services came in at 52.0 for October
- This was a rise from September’s release of 50.3.
- Following the release earlier in the month of the CAIXIN PMI Manufacturing at 50.3, the resulted in composite rising to 51.9 from 50.3.
- The results are consistent with recent data which indicates that the impact of the various stimulus packages are starting to show up in the broader economy.
- The CAIXIN PMI Survey covers small and medium sized businesses and therefore is considered a more reliable indicator of the performance of China’s private sector.
