FX HIGHLIGHTS

Global: The dollar fell marginally by 0.08% to 97.690. On the data front, pending home sales which is a forward indicator rose 1.5% to 108.7 In September, marking two consecutive months of increase from August’s downwardly revised reading of 107.1. Year-on-year, it jumped 3.9% in September from 2.3% y/y in August. It shows consumers are reacting positively to the historically low mortgage rates. On the equity front, the Dow slipped 0.07% to 27,071 while S&P500 fell slightly by 0.08% to 3,037 due to disappointing results from Alphabet, Google’s parent company. Meanwhile, the UST10-year yield eased by 0.35bps to 1.839% as the Federal Reserve began its two-day meeting, where its policy-making committee is expected to lower interest rates for the third time this year. Gold dropped 0.32% to US$1,488/oz.

The pound fell slightly by 0.01% to 1.286 after the UK PM won parliament’s preliminary approval to hold Britain’s first December election in a bid to break the Brexit deadlock. By a margin of 438 votes to 20, the House of Commons approved legislation paving the way for the first winter election on 12 December since 1923. The euro strengthened 0.11% at 1.111 against the dollar. As for the Japanese yen, it rose slightly by 0.06% to 108 and the Chinese yuan was up a little by 0.04% at 7.066. The commodities market saw a mixed reaction as Brent edged up by 0.03% to US$61.59/bbl while WTI fell 0.48% to US$55.54/bbl.

Malaysia: The MYR inched up by 0.01% to 4.184 against the dollar. The benchmark KLCI closed higher by 0.5% to 1,577.8. Demand for MGS was seen in the 3- and 5-year tenors as the yields eased by 0.5bps each to 3.150% and 3.450%, respectively. Meanwhile the 5- and 7-year yields remained unchanged at 3.290% and 3.450%. Both the 1- and 3-year IRS rose 2.5bps to 3.290% each while the 5- and 7-year added 1.5bps to 3.335% and 1bps to 3.385%, respectively. The 10-year was muted at 3.435%. The 3-month KLIBOR stood firm at 3.38%.

Against the major currencies, the MYR closed in the red, falling 0.06% to 5.370 vs. the GBP, 0.07% at 3.843 vs. the JPY and 0.03% to 1.689 vs. the CNY but strengthened 0.07% at 4.638 vs. the EUR. The MYR rose against most of its regional peers; (THB) 0.09% to 7.230, (IDR) 0.11% at 3,354.3 and (VND) 0.08% at 5,547.0. However, the ringgit fell (SGD) 0.01% at 3.072 and (PHP) 0.10% to 12.21.

MYR Outlook: We expect the local currency to move within our support levels of 4.1705 and 4.1759 while resistance is pegged at 4.1934 and 4.1988. The Federal Open Market Committee is likely to cut its benchmark fed funds rate down to a range of 1.50%-1.75% on Wednesday. At the same time, we expect the Fed to most likely provide with a little forward guidance in its policy statement and the post-meeting news conference. That way, the Fed could stay aligned with its previously stated stance that recent rate cuts are part of a “mid-cycle” adjustment, giving time for the US central bank to see how the impact of more accommodative monetary policy and easing international trade tensions shake out.

On the trade front, the Trump administration has pointed out that “phase one” of the US-China trade deal may not be signed at the upcoming Chile summit, adding that further time was needed.

Source: AmInvest Research - 30 Oct 2019