FX HIGHLIGHTS

Global: The dollar fell 0.05% to 97.646 even after the Fed slashed its benchmark interest rates for the third time this year by 25bps to 1.50%– 1.75%, which fell in line with expectations. The interest rate on excess reserves (IOER) was lowered to 1.55%. The dollar dropped although the Fed hinted a pause on its rate cutting cycle as the Fed eliminated a familiar reference that it “will act as appropriate to sustain the expansion” – language that was broadly considered a sign for future rate cut. We believe the Fed will adopt a wait-and-see approach before timing its next rate cut. The dollar has also gained some momentum after the 3Q2019 GDP advance estimation slowed down less than expected to 1.9% q/q compared to 2.0% q/q in 2Q2019 (cons: 1.6%). The equities market rose as the market cheered over the third consecutive rate cut with the Dow rising 0.44% to 27,187 while S&P500 was up 0.33%, hit an all-time high of 3,047. The UST10-year fell 6.7bps to 1.772% while gold prices rose 0.53% to US$1,496/oz. The euro climbed 0.35% to 1.115 as a result of a weaker dollar. On the data front, the business climate indicator of the EU rose slightly by 0.04 point to - 0.19 in October from -0.23 in September (cons: -0.24). The assessment highlighted that production expectations continued to deteriorate despite stocks of finished products and overall order books remaining broadly stable. The pound appreciated by 0.31% to 1.290 after reports that the Brexit Party is considering pulling out of hundreds of seats in what would be a game-changer for Boris Johnson's hopes of winning a general election. At the same time, we heard that the UK House of Lords has approved the first hurdle for PM Johnson’s early election bill for 12 December, as widely expected. The Japanese yen rose 0.04% to 108.9 owing to risk-off sentiment. Japan’s retail sales accelerated to 9.1% y/y in September from 1.8% y/y in August and beating market expectations of 6.9%. It was the biggest increase in retail trade since March 2014 as the VAT tax is implemented in October. The Chinese yuan rose 0.15% to 7.055 against the dollar. Brent plunged 1.59% to US$60.61/bbl while WTI slid 0.86% to US$55.06/bbl on larger-than-expected inventories build-up for the week ending 25 October by 5.7mil barrels (cons: 0.5mil) as reported by the EIA.

Malaysia: The MYR rose slightly by 0.09% to 4.180. The KLCI gained 0.14% to 1,580. Trades in the local bond market were seen especially on the 5-year tenor as the yield added 8bps to 3.370% while the 10-year rose 0.5bps at 3.460%. The 3- and 7-year yields muted at 3.150% and 3.450%, respectively. Elsewhere, the 3-month KLIBOR stood firm at 3.38%. Meanwhile, the reopening of the 5Y MGS maturing on June 2024 garnered a weak BTC of 1.433x on the back of a RM3.5bil issuance size. The auction closed with a high/low of 3.407% and 3.330% while averaging at 3.364%. Against the major currencies, the MYR fell mostly by; 0.29% to 4.652 vs. the EUR, 0.34% at 5.388 vs. the GBP and 0.05% at 1.688 vs. the CNY but it rose 0.05% at 3.841 vs. the JPY. Among its Asean peers, the MYR traded mixed, seeing; (SGD) +0.02% at 3.071, (THB) -0.01% at 7.229, (IDR) +0.06% at 3,356.4, (PHP) -0.18% at 12.18 and (VND) +0.07% at 5,550.7.

MYR Outlook: We foresee the MYR trading within our support levels of 4.1665 and 4.1719 while our resistance is pegged at 4.1925 and 4.1986.

Source: AmInvest Research - 31 Oct 2019