• Dollar losses support on weak GDP data

• MYR to fluctuate in the range of 4.1390 and 4.1460 against US dollar

Global Highlights

The dollar index fell by 0.49% to 93.345 following a weaker-than-expected US economic report. The preliminary report showed that the US economy grew by 4.6% in 3Q21 on a non-seasonally adjusted year-on-year basis, down from 12.5% during the previous quarter. On a seasonally adjusted annual rate, the economy grew 2%, much lower than the market forecast of 2.7%, which dampened the dollar sentiment. Also, the number of existing homes sales declined by 2.3% in September, below market expectations of an unchanged figure.

Other than that, positive weekly labour market data seemed unable to provide the needed support to the greenback. The number of Americans filing new claims for unemployment benefits for the week ended 23 Oct dropped to a fresh pandemic low at 281K, beating the forecast of 290k.

Equities rebounded to recover Wednesday’s losses when the Dow Jones rose 0.68% to 35,730 and S&P 500 climbed 0.98% to 4,596. The UST 10-year yield benchmark rose 3.87bps to 1.580%. Gold extended its gains as it added 0.12%% to US$1,799/oz.

Reflecting the weaker greenback, the euro soared by as much as 0.67% to close at 1.168 driven by the hawkish ECB president's slight hawkish tone after its meeting as Christine Lagarde is expecting the PEPP to end by March 2022. The central bank maintained its key interest rate, specifically the interest rate on the main refinancing operations on the marginal lending facility and the deposit facility will be kept at 0.00%, 0.25% and -0.50% respectively. On the data front, the consumer confidence indicator in the Eurozone was confirmed at -4.8 for its final report.

The British pound gained 0.33% to 1.379. Among local data, the UK car production plunged 41.5% year-on-year to 67,149 in September of 2021 which marked the third consecutive month of decline.

The Japanese yen strengthened by 0.22% to 113.58 following the BoJ’s meeting. The central bank maintained its short-term interest rate target at -0.1% and its 10-year government bond yield target around 0%, while cutting the inflation forecast to 0% from 0.6% and the country’s economic growth to 3.4% from 3.8% due to sluggish consumption and slowdown in exports. Other than that, retail sales in Japan declined by 0.6% y/y in September which is better than the forecast of 2.3% drop.

In the meantime, the Chinese yuan strengthened marginally by 0.01% to 6.392. The pressure on yuan extended from Wednesday when Reuters reported that some Chinese developers have proposed to extend their offshore bond maturities.

Crude oil was mixed when Brent lost 0.31% to US$84.3 per barrel while the WTI edged higher by 0.18% to US$82.8 per barrel. On political front, one of Iran’s officials said on Wednesday that country will resume its talks with other bigger countries by the end of November on a 2015 nuclear deal. This could pave the way for Iran’s oil exports sanction to be lifted in the future.

Malaysia Highlights:

The ringgit rebounded stronger when it appreciated by 0.10% to 4.150. It was traded at a high of 4.1582 and low of 4.1488. All eyes will be on the tabling of the Budget 2022 by the Ministry of Finance later today.

The FBM KLCI dropped a further 1.02% to 1,567 as investors took to the sidelines ahead of Budget 2022 announcement. Detailed transactions showed that local retailers were sole buyers with a RM78.5mil position while both local institutions and foreign investors were net sellers with RM25.9mil and RM52.6mil, respectively.

Over to the local bond market, the yield curve flattened when the 3-years +4.5bps to 2.680%, 5-years +3.0bps to 3.170%, while the 7-years -3.0bps to 3.420% and 10-years -2.0bps to 3.580%.

The IRS curve was mixed. The (7Y) -0.5bps to 3.255% while (3Y) +9.5bps to 2.790%, (5Y) +2.5bps to 2.975% and (10Y) +6.0bps to 3.475%.

Against major currencies, the ringgit strengthened vs. the EUR by 0.10% to 4.811 and vs. the CNY by 0.09% to 1.540, but weakened against the JPY by 0.26% to 3.659, against the AUD by 0.05% to 3.118 and against the GBP by 0.11% to 5.706. Against its Asean peers, the ringgit depreciated vs. the SGD by 0.05% to 3.079, and vs. the THB by 0.19% to 7.996, but appreciated vs. the IDR by 0.10% to 3,415, vs. the PHP by 0.05% to 12.221, and vs. the VND by 0.11% to 5,483.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1330 and 4.1390 while our resistance is pinned at 4.1460 and 4.1524.

Source: AmInvest Research - 29 Oct 2021