AmInvest Research Reports

Author: AmInvest   |   Latest post: Fri, 26 Nov 2021, 10:27 AM


Economics & FX Highlights - Crude oil remains bullish amidst an energy crisis

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  • Crude oil remains bullish amidst an energy crisis
  • MYR to fluctuate in the range of 4.1480 and 4.1644 against US dollar

Global Highlights

The dollar index retreated from its 13-month high when it shed 0.13% to close at 93.956 amidst a still bullish trend due to the Fed’s tapering prospect. In addition, weekly labour market data provided little to no support for the greenback. Data showed the number of new unemployment benefit claim has dropped to its lowest since March 2020 at 293K as of 9 October. Separately, the Producer Price Index (PPI) grew at slower pace of 0.5% m/m in September compared to August’s 0.7%.

Equities closed in the green when the Dow Jones rose 1.56% to 34,913 and S&P 500 gained 1.71% to 4,438. The UST 10-year yield benchmark dipped 2.61bps to 1.511%. Gold closed higher as it added 0.16% to US$1,796/oz.

The Common Currency Euro Was Up a Marginal 0.03% to 1.160.

Similarly, the British pound added 0.10% to 1.367. BoE official Silvana Tenreyro stated that the central bank should not react to the inflationary pressure by raising interest rates if it deems that the effects of surging prices are temporary. The statement came amidst an energy crisis that is still looming in the UK.

The Japanese yen weakened by 0.38% to 113.68. On the data front, a final report indicated the industrial output for August grew slower at 8.8% on an annual basis. But the same indicator contracted by 3.6% based on monthly changes, which is a much larger decline than July's 1.5% m/m. On the political front, the Japanese Prime Minister Fumio Kishida dissolved parliament on Thursday for a general election on 31 Oct as the lower house comes to the end of its four-year term. This could prompt a fluid situation for the currency after hitting a three-year low recently.

In the meantime, the Chinese yuan weakened by 0.18% to 6.440 following the release of inflation data. Inflation in China posted a slower growth in September at 0.7% y/y, compared to August’s 0.8% and below the forecast of 0.9%.

Crude oil was boosted by the ongoing supply and demand mismatch in the commodities market. Brent soared 0.99% to US$84.0 per barrel while WTI rose 1.08% to US$81.3 per barrel. The International Energy Agency said on Thursday that surging natural gas prices could jack up demand among power generators.

Malaysia Highlights:

The ringgit closed stronger as it appreciated by 0.14% to 4.154 and was traded at a high of 4.1573 and low of 4.15. So far, the ringgit has been bullish for sixth consecutive days.

The FBM KLCI paused its rally when it fell 0.49% to 1,593. Transaction details showed that foreign investors were net buyers with RM79.9mil, while local retailers and institutions were net sellers with RM32.8mil and RM47.1mil, respectively.

Over to the local bond market, the yield curve flattened when the 3-year yield rose 0.5bps to 2.550% but the 5-year was -2.0bps to 3.120%, 7-year -7.0bps to 3.430%, and 10-year -6.0bps to 3.560%.

The IRS yields fell across the duration; the 3Y at -2.0bps to 2.585%, the 5Y at -4.2bps to 2.885%, the 7Y -3.1bps to 3.118% and the 10Y was -9.5bps to 3.365%.

Against major currencies, the ringgit mostly rose as it appreciated vs. the JPY by 0.52% to 3.654 and vs. the CNY by 0.08% to 1.550, but depreciated vs. the EUR by 0.31% to 4.823, vs. the GBP by 0.46% to 5.695, and vs. the AUD by 0.70% to 3.079. Regionally, the ringgit also strengthened; vs. the THB by 0.07% to 7.984, vs. the PHP by 0.02% to 12.189, and vs. the VND by 0.14% to 5,477. The ringgit weakened vs. the SGD by 0.21% to 3.081 and vs. the IDR by 0.57% to 3,398.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1330 and 4.1480 while our resistance is pinned at 4.1644 and 4.1785.


Source: AmInvest Research - 15 Oct 2021

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