• Disappointing labour market data can mute dollar’s bullish trend

• MYR to fluctuate in the range of 4.1640 and 4. 1775 against US dollar

Global Highlights

The dollar found little to no support as it ended Friday 0.16% lower at 94.067, following the disappointing labour market report. The US economy only added 194K jobs in September, the lowest this year so far, and well below the previous month’s of 366K and market expectation of 500K. The average weekly hours rose to 34.8 while the average hourly earnings climbed by 0.6% MoM. Still, the unemployment rate dropped to 4.8% from 5.2% in August and was the lowest rate since March 2020. Separately, there 136 member countries of the OECD have agreed to a global minimum corporate tax rate of 15% which is expected to kick in by 2023.

Equities closed in the red as the Dow Jones edged lower by 0.03% to 34,746 and the S&P 500 fell 0.19% to 4,391. The UST 10- year yield benchmark rose to above 1.6% for the first time since June 2021. It climbed 3.89bps to 1.612%. Gold edged higher by 0.08% to US$1,757/oz.

The euro rose 0.15% to 1.157 after minutes from the ECB September monetary policy meeting on Thursday showed that the policymakers discussed a larger trim in the bond buying programme. This offered a slight hawkish tone with which the euro can find support from moving forward.

The British pound declined by 0.03% to end the week at 1.362.

The Japanese yen continued to depreciate as it shed 0.55% to 112.24. On the local data front, the average cash earnings in Japan increased by 0.7% YoY in the month of August, which marked the sixth consecutive month of increase. Also, Japan’s current account surplus narrowed to ¥1.6tril in August beating the forecast of ¥1.5tril.

In the meantime, the Chinese yuan strengthened by 0.02% to 6.444 after the market reopened following the five-day holiday. The currency also found upward pressure from the upbeat services sector data. According to a report by Caixin China General Services, the headline PMI rose to 53.4 in September from 46.7 in August.

Crude oil remained elevated amidst signs of some industries starting to shift to oil from gas. Brent rose 0.54% to US$82.4 per barrel and WTI jumped 1.34% to US$79.4 per barrel.

Malaysia Highlights:

The ringgit strengthened for the second consecutive day by 0.12% to 4.178, down from last week’s low at 4.183. It was traded at a high of 4.184 and low of 4.1775 throughout the day.

The FBM KLCI closed higher by 0.17% to 1,564, driven by net buying from retailers at RM2.98mil and foreign investors at RM122.95mil. Local institutions were the net sellers at RM125.92mil.

Over the weekend, Prime Minister Datuk Seri Ismail Sabri Yaakob announced that Malaysia will allow interstate travel and relax the rules for overseas travel effective today, possibly providing positive support for the ringgit this week.

The local bond saw selling pressure again when the 5-year yield added 7.0bps to 3.110%, 7-year +2.0bps to 3.495%, and 10- year +2.0bps to 3.625%. The 3-year yield remain unchanged at 2.530%.

The IRS yield curve reflected the movement on local bonds’ yields as the curve shifted higher. (3Y) +3.0bps to 2.575%, (5Y) +4.0bps to 2.920%, (7Y) +6.5bps to 3.125%, and (10Y) +8.0bps to 3.450%.

Against major currencies, the ringgit was mixed i.e. it appreciated against the EUR by 0.07% to 4.832, against the JPY by 0.66% to 3.722, and against the CNY by 0.11% to 1.543. But it slid against the GBP by 0.03% to 5.686 and against the AUD by 0.10% to 3.050. Against its Asean peers, the ringgit strengthened across the board; vs. the SGD by 0.08% to 3.079, vs. the THB by 0.43% to 8.112, vs. the IDR by 0.17% to 3,405, vs. the PHP by 0.03% to 12.095, and vs. the VND by 0.14% to 5,449.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1560 and 4.1640 while our resistance is pinned at 4.1775 and 4.1850.

Economic Update

Malaysia - A slow and steady recovery in labor market

August’s unemployment rate improved to 4.6% after peaking at 4.8% in June and July.

We expect Malaysia's full-year unemployment rate to settle at 4.4% from 4.8% previously as the economy reopens with the labour market continuing to recover, albeit at a moderate pace.

Still, we need to remain cautious. Uncertainties surrounding new Covid-19 virus variants and business prospects could put a lid on job prospects. There is a need to look at the underemployed segment and those in the informal sector. It will take a few years, likely around 2023 for the country to reach an unemployment rate around the 3.3% pre-pandemic level.
 

Source: AmInvest Research - 11 Oct 2021