• Renminbi on Winning Streak
• MYR to fluctuate in the range of 4.1400 and 4.1650 against US dollar

Global Highlights

The dollar index fell 0.14% to 93.642 on Friday following a statement made by Fed chairman Jerome Powell that the Federal Reserve should taper purchase assets soon but it will not to raise interest rate as employment is still low and high inflation is likely to dissipate next year. Also, a preliminary October report by IHS Markit suggested that US business activities remained positive when the manufacturing PMI edged lower to 59.7 from 60.7 in September, while the services PMI soared to 58.2 from 54.9.

Equities were mixed with the Dow Jones rising 0.21% to 35,677 while the S&P 500 was down 0.11% to 4,545. The UST 10-year benchmark tumbled 6.8bps to 1.632%%. Gold climbed 0.55% to US$1,793/oz.

Reflecting the weaker dollar, the euro gained 0.17% to 1.164. Data showed that the flash manufacturing PMI in the Eurozone contracted again for the fourth straight month to 58.5 in October from 58.6 in the month before. It marked the lowest point in eight months. The Services PMI also edged lower to 54.7 from 56.4 although the figures remained elevated based on historical standards.

The British pound fell 0.28% to 1.376 amidst weak retails and consumer confidence data. A report by the Office for National Statistics showed that retail sales in the UK declined by 1.3% y/y and 0.2% m/m. Both fell short of the market forecast of a contraction of 0.4% and a growth of 0.5%, respectively. Also, the Gfk Consumer Confidence Headline Index dropped to -17 in October, lower than the market forecast of -16 and -13 in the prior month. The business activity in the UK increased solidly when the flash manufacturing PMI headline rose to 57.7 (cons. 55.8) while the services PMI increased to 58 (cons. 54.5).

The Japanese yen strengthened 0.43% to 113.50. Japan’s inflation rate rose to 0.2% after it logged a contraction since August 2020. Other than that, the Jibun Bank manufacturing PMI rose to 53 from 51.5 while the services PMI climbed to 50.7, up the contraction zone of 47.8.

In the meantime, the Chinese yuan appreciated 0.13% to 6.385 after the State Administration of Foreign Exchange said on Friday that the government will roll out counter-cyclical measures if the currency market fluctuates too much.

Crude oil resumed its bullish move when the Brent jumped 1.09% to US$85.5 per barrel while the WTI soared 1.53% to US$83.8 per barrel

Malaysia Highlights:

The ringgit ended the week on a stronger footing when it firmed 0.18% to 4.151. It was traded at a high of 4.160 and low of 4.149.

The Malaysian government has announced a further relaxation of travel restriction on Friday, lifting hopes for the country’s embattled tourist industry with Langkawi being the first destination to be opened for international tourists beginning mid November.

The FBM KLCI slid 0.22% to 1,588. Detailed transactions showed that both local institutions and retailers were net sellers with RM90.5mil and RM0.53mil, respectively, while foreign investors were net buyers of RM91.06mil.

The local bond market saw mixed movements with the 3-year and 7-year remaining unchanged at 2.620% and 3.480% respectively, while the 5-year was +1.0bps to 3.180% and 10-years +1.5bps to 3.625%.

The IRS yield curve shifted higher; (3Y) +1.0bps to 2.655%, (5Y) +2.0bps to 2.950%, (7Y) +0.5bps to 3.200% and (10Y) +3.0bps to 3.500%.

Against major currencies, the ringgit weakened vs. the AUD by 0.08% to 3.116, vs. the JPY by 0.29% to 3.658, and vs. the CNY by 0.08% to 1.538 but it strengthened against the EUR by 0.18% to 4.832. The ringgit was flat against the GBP at 5.734. Regionally, the ringgit depreciated against the SGD by 0.01% to 3.088, against the THB by 0.02% to 8.036 and against the PHP by 0.03% to 12.232, but appreciated against the IDR by 0.18% to 3,403 and the VND by 0.21% to 5,483.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1300 and 4.1400 while our resistance is pinned at 4.1650 and 4.1725.

Economic Update

Malaysia - Inflationary pressure picking up steam

The rise in September’s headline inflation by 2.2% y/y from 2.0% in August, which is the fastest following the reimposition of MCO 3.0, was driven by cost pressures from transport and food. This brings the average inflation for the first nine months to 2.27%.

Upwards pressure on inflation is expected to stay driven by transfer pricing due to the rising cost of businesses arising from higher commodity prices and materials. This is despite a dissipating low base and a contained fuel price with the government having set the ceiling price for RON95 and diesel at RM2.05 and RM2.15, respectively until the end of this year. For the full year, we are maintaining our inflation projection at 2.6%–2.8% with no change to the OPR outlook of 1.75%.

Source: AmInvest Research - 25 Oct 2021