• Interest rate hike expectation sustained

• MYR to fluctuate in the range of 4.1360 and 4.1460 against US dollar

Global Highlights

The dollar index soared 0.83% to 94.123, the highest since mid-October. A report showed that the Fed’s preferred inflation measure continued to grow at a faster pace than the target of 2%. The Personal Consumption Expenditure Price Iindex in the US rose 4.4% y/y while the core index increased 3.6%. This bolstered expectations for an earlier-than-anticipated interest rate hike. Other than that, personal income in the US States dropped 1.0% m/m in September 2021 while personal spending increased 0.6% m/m. On monthly changes, the dollar index fell by 0.11% for the month of October.

Equities closed on record highs when the Dow Jones rose 0.25% to 35,820 while the S&P 500 climbed 0.19% to 4,605. The UST 10-year yield fell 2.79bps to 1.552%. Gold declined by 0.86% to US$1,783/oz. Reflecting the stronger dollar, the euro tumbled sharply by 1.05% to 1.156. Local data showed that the annual inflation rate in the Euro Area jumped to 4.1% y/y in October of 2021 from 3.4% y/y in September and higher than the market forecast of 3.7%, preliminary estimates showed. It is the highest reading since July of 2008.

Also, the Euro Area economy expanded by 3.7% y/y in the third quarter of 2021, following a downwardly revised 14.2% growth in the previous period and slightly beating market expectation of 3.5%, a preliminary estimate showed. The Euro Area economy expanded by 2.2% on the quarter supported by strong domestic demand and exports, while supply chain disruptions, shortages of raw materials, and rising consumer prices weighed on recovery. On monthly changes, the euro dropped by 0.18% for the month of October.

The British pound fell 0.78% to 1.368. Data showed that consumer credit in the UK rose £0.2 billion in September of 2021, following an upwardly revised £0.5 billion increase in August and missing market expectations of a £0.45 billion rise. The number of mortgage approvals for house purchase in the UK decreased to 72.6K in September 2021, from a revised 74.2K in the previous month and slightly above market expectations of 70.95K. This was again the lowest since July 2020 but remained above pre-pandemic levels. By the end of October, the pound had risen by 1.54% compared to end of September.

The Japanese yen weakened by 0.33% to 113.95, to end a choppy week. Among local data, the Consumer Confidence Index in Japan was up 1.4 points from the previous month to 39.2 in October of 2021. It was the strongest reading since May 2019. Also, Japan’s unemployment rate was at 2.8% in September 2021, unchanged from the previous two months and in line with market consensus. On monthly performance, the yen weakened by 2.39%.

In the meantime, the Chinese yuan weakened by 0.22% to 6.406 as it underwent heavy selling in the previous session amid reports that state banks buying dollars in the spot market. Chinese government bonds were included in the FTSE Russell flagship World Government Bond Index on Friday, providing support to the yuan by attracting foreign capital inflows. For October, the yuan strengthened by 0.60%.

Crude oil rebounded when Brent rose 0.07% to US$84.4 per barrel and WTI climbed 0.92% to US$83.6 per barrel, supported by expectations that the OPEC+ would maintain production cuts.

Malaysia Highlights:

The ringgit strengthened by 0.24% to 4.140 as investors digested Budget 2022 released on Friday. It was traded at a high of 4.1465 and low of 4.1392. For October’s performance, the ringgit strengthened by 1.09%

The FBM KLCI closed lower as it dropped by 0.29% to 1,562. Detailed transactions showed that both local institutions and foreign investors were net sellers with RM10.3mil and RM43.8mil, respectively, offset by local retailers' buying of RM54.2mil.

Over to the local bond market, actions were accumulated on the short to the belly part of the curve. The 3-year was +4.0bps to 2.720%, 5-year +7.0bps to 3.240%, 7-year +2.0bps to 3.440%, while the 10-year remained unchanged at 3.580%.

The IRS yield curve shifted higher with (3Y) +4.0bps to 2.830%, (5Y) +8.0bps to 3.055% (7Y) +1.5bps to 3.270%, and (10Y) +2.5bps to 3.500%.

Against major currencies, the ringgit strengthened against the GBP by 0.02% to 5.705, the JPY by 0.76% to 3.631, and the CNY by 0.46% to 1.547, but weakened against the EUR by 0.27% to 4.824, and against the AUD by 0.10% to 3.121. Regionally, the ringgit appreciated against the SGD by 0.01% to 3.079, THB by 0.63% to 8.047, the IDR by 0.21% to 3.422, and the VND by 0.22% to 5,495, but weakened against the PHP by 0.41% to 12.171.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1300 and 4.1360 while our resistance is pinned at 4.1460 and 4.1524.

Source: AmInvest Research - 1 Nov 2021