FX HIGHLIGHTS

Global: The dollar rose 0.14% to 97.631 owing to: (1) a dovish ECB; and (2) stronger-than-expected data which includes October Markit Manufacturing PMI preliminary estimate rising to 51.5 points from 51.1 points in September and beating market expectation of 50.7. This is the strongest expansion in factory activity since April, as output, new orders and employment rose at a faster pace. Also, October Markit Services PMI rose to 51.0 from 50.9 in September (cons: 51.0). Meanwhile, the Dow slipped 0.11% to 26,806 on a slew of disappointing earnings result while the S&P500 rose 0.19% to 3,010. UST10-year yields rose 0.18bps to 1.766% while gold prices rose 0.79% to US$1,503/oz.

The euro slid by 0.23% to 1.110 after the ECB monetary meeting ended with an overall dovish tone. This was Draghi’s last meeting. As expected, the ECB kept interest rate at 0% and deposit rate at -0.50%. The meeting was short on forward guidance, but the ECB still see the need for highly accommodative policy amid weak growth, muted underlying inflation and low inflation expectations. On the data front, the EU October Manufacturing PMI stayed flat at 45.7 (cons: 46). However, the health of the manufacturing sector remains depressed as the survey highlighted output dropped for a ninth straight month while new orders and exports continued to shrink. Also, employment fell in the sharpest pace since the start of 2013. The EU October Services PMI rose 51.8 from 51.6 in September (cons: 51.9).

The pound shed 0.47% to 1.285 after PM Boris Johnson made a bid for a snap election. The Japanese yen rose 0.07% to 108.6 as demand for the safe-haven currency strengthened. However, market players remained cautious after October’s flash Jibun Manufacturing PMI contracted further to 48.5 from 48.9 in September (cons: 48.8), the quickest contraction pace since June 2016.

Meanwhile, the yuan slipped 0.06% to 7.069 against the stronger dollar. Both Brent and WTI climbed for the third consecutive day this week by 0.82% to US$61.67/bbl and 0.46% to US$56.23/bbl, respectively.

Malaysia: The MYR appreciated 0.04% to 4.185 against the dollar. The benchmark KLCI gained 0.15% to 1,571.1. However, selling pressure heightened in the local bond market, resulting in the MGS 3-, 5-, 7- and 10- year yields adding 2bps to 3.155%, 1bps to 3.265%, 6.5bps to 3.450% and 4bps at 3.460%, respectively. The 5-year IRS rose 0.5bps to 3.320% while the 1-, 7- and 10-year added 0.5bp to 3.268%, 1.5bps to 3.365% and 1bps to 3.430%. The 3-year eased slightly by 0.1bps at 3.265%. Elsewhere, the 3-month KLIBOR stood firm at 3.38%.

Against the major currencies, the MYR closed in the red, falling; 0.09% to 4.661 vs. the EUR, 0.25% to 5.396 vs. the GBP and 0.04% at 3.853 vs. the JPY but strengthened by 0.09% to 1.689 vs. the CNY. The MYR rose against most of its regional peers; (SGD) 0.02% at 3.072, (IDR) 0.24% at 3,359.6, (PHP) 0.69% at 12.27 and (VND) 0.05% at 5,544.7. However, the ringgit fell 0.11% to 7.231 vs. the THB.

MYR Outlook: We foresee the ringgit fluctuating within our support levels of 4.1752 and 4.1800 with resistance pegged at 4.1902 and 4.1940.

Source: AmInvest Research - 25 Oct 2019