• Positive ADP jobs data raises early Fed taper bet

• MYR to fluctuate in the range of 4.1653 and 4.1829 against US dollar

Global Highlights

The dollar index added 0.31% to close at 94.266 amid progress in the US ceiling debt deal and inflation woes. Separately, the International Monetary Fund (IMF) said that it now expects the global economy to grow slightly below July’s forecast of 6% in 2021, attributing it to inflation and divergent economic trends.

On the data front, businesses in the US hired 568K workers in September, the highest figure in three months and above the market forecast of 428K. This increases the bet that the Fed will taper sooner rather than later.

Equities closed in the green when the Dow Jones rose 0.30% to 34,417 and S&P 500 gained 0.41% to end the day at 4,364. The UST 10-year benchmark yield was sent lower by 0.52bps to 1.521%. Gold edged higher by 0.15% to US$1,763/oz.

The euro tumbled 0.36% to end at 1.156, its lowest point since July 2020, amid the increasing prospect of interest rate hikes by other central banks around the world. In addition, a slightly positive retail data could not provide the needed support to the currency. Retail sales in the Eurozone rose by 0.3% on a monthly basis but remained unchanged on an annually.

The British pound closed lower by 0.34% to 1.358 as concerns on soaring energy prices remained. Among local data, the construction sector saw slower growth in September as the IHS Markit/CIPS PMI slipped to 52.6, missing market expectation of 54.0. It is the lowest point since June 2021.

The Japanese yen strengthened by 0.04% to 111.41 after the new finance minister under new Prime Minister Fumio Kishida stated that he will keep the current fiscal and monetary policy intact.

In the meantime, the Chinese yuan remained unchanged at 6.445. Fears of a widespread contagion from the debt-laden property sector in China renewed when another developer Fantasia missed its interest payment recently.

Crude oil was in the red following data released from the EIA showing an unexpected increase in crude oil stock by 2.346mil barrels, instead of the market projection of a 0.418mil drop. The Brent declined sharply by 1.79% to US$81.1 per barrel while the WTI decreased by 1.90% to US$77.4 per barrel.

Malaysia Highlights:

The ringgit weakened for the second consecutive session when it closed lower by 0.11% to 4.184 after trading at a high of 4.1875 and low of 4.1785.

The FBM KLCI surged 1.89% or 29 points to 1,559. Detailed transaction showed that both local institutions and retailers were net sellers at RM96.9mil and RM38.7mil, respectively, offsetting the RM135.6mil buying position by foreign investors.

We saw selling pressure in the local bond market as the yield curve shifted higher across the board, especially in the belly part of the curve. The 3-year yield +9.0bps to 2.550%, 5-year +9.0bps to 3.020%, 7-year +11.5bps to 3.460% and 10-year +14.0bps to 3.585%.

The IRS yields were also higher when (3Y) +2.8bps to 2.513%, (5Y) +6.0bps to 2.860%, (7Y) +8.0bps to 3.055%, and (10Y) +8.0bps to 3.300%.

Against major currencies, the ringgit strengthened; vs. the EUR by 0.42% to 4.829%, vs. the GBP by 0.35% to 5.672, vs. the AUD by 0.55% to 3.026, but weakened against vs. the CNY by 0.10% to 1.540, JPY by 0.11% to 3.753. Against its Asean peers, the ringgit appreciated; vs. the SGD by 0.20% to 3.073, vs. the THB by 0.03% to 8.086, and vs. the PHP by 0.30% to 12.159 but depreciated against the IDR by 0.11% to 3,407 and the VND by 0.09% to 5,441.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1558 and 4.1653 while our resistance is pinned at 4.1829 and 4.1915.

Source: AmInvest Research - 7 Oct 2021