• Yuan hits 5-month high amid broad weakening of greenback

• MYR to fluctuate in the range of 4.1459 and 4.1775 against US dollar

Global Highlights

The dollar index dipped 0.23% to 93.734 following weak homebuilding and industrial production data. A report by the US Census Bureau stated that the housing starts fell to 1.55mil for September, marking the lowest in five months, falling short of the forecast of 1.62mil. Building permits also contracted, down to 1.59mil from 1.72mil in August and below the market forecast of 1.68mil. On Monday, data showed industrial output grew by 4.6% y/y in September but declined by 1.3% on monthly changes (cons.: +0.2% m/m).

US stocks were in the green on upbeat earnings. The Dow Jones added 0.56% to 35,457, the highest since August, while the S&P 500 gained 0.74% to 4,520. The US Treasury 10-year benchmark yield rose by 3.7bps to its highest since May 2021 at 1.637%. Gold rebounded 0.25% to US$1,769/oz as it retraced its losses last week.

The euro gained 0.20% to 1.163. Among local data, construction output in the eurozone declined by 1.6% y/y for August compared to a 3.5% growth in July.

Amidst a broad weakening of the dollar, the British pound climbed 0.52% to 1.380. Investors increased their bets that the BoE will hike interest rate sooner than expected following the central bank’s governor Andrew Bailey statement on Sunday that the BoE will have to act to deal with the surging inflation.

The Japanese yen continued to close in the red for the fourth consecutive day, weakening by 0.05% to 114.38.

The Chinese yuan strengthened sharply by 0.74% to 6.383, which is the highest since May 2021. We believe the currency may have been boosted by easing property sector fears as some of the companies made coupon payments this week. This is despite the weaker-than-expected Chinese economic growth data on Monday. The local economy for third quarter of 2021 grew by 4.9% y/y compared to the market forecast of 5.2% y/y and below the previous quarter’s 7.9% y/y.

Crude oil remained bullish when Brent rose 0.89% to US$85.1 per barrel while WTI climbed 0.63% to US$83 per barrel amidst ongoing energy crunch concerns and the approaching winter season.

Malaysia Highlights:

By the end of Monday, the ringgit has slid by 0.29% to 4.170. We suspect that it was due to technical correction amidst its bullish trend. It was traded at a high of 4.172 and low of 4.1545.

The local bourse's FBM KLCI gained 0.48% to close at 1,606 points. Detailed transactions showed that foreign investors extended their net buying positions, logging as much as RM237.9mil in value. On the other hand, local institutions and retailers were net sellers with RM215.7mil and RM22.2mil, respectively.

Over in the local bond market, MGS yields shifted higher throughout the durations. The 3-year was +3.5bps to 2.585%, 5-year at +7.0bps to 3.190%, 7-year +2.0bps to 3.450%, and 10-year +0.5bps to 3.550%.

The IRS yield curve also closed higher with the 3Y at +4.0bps to 2.625%, 5Y +5.5bps to 2.950%, 7Y +4.5bps to 3.185%, and 10Y +9.0bps to 3.470%.

Against major currencies, the ringgit was mostly lower. It weakened against the EUR by 0.09% to 4.829, the GBP by 0.28% to 5.772, the JPY by 0.35% to 3.651 and the CNY by 0.33% to 1.542 but strengthened against the AUD by 0.11% to 3.081. Against its Asean peers, the ringgit was mixed. It appreciated against the THB by 0.20% to 8.023 and the IDR by a meagre 0.01% to 3,384, but depreciated against the SGD by 0.11% to 3.088, the PHP by 0.05% to 12.192, and the VND by 0.32% to 5,458.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1329 and 4.1459 while our resistance is pinned at 4.1775 and 4.1850.

Source: AmInvest Research - 20 Oct 2021