• Dollar reaches 16-month high

• MYR to fluctuate in the range of 4.1561 and 4.1700 against US dollar

Global Highlights

The dollar index surged 0.35% to 95.178, almost touching the 16-month high as the recent red-hot US inflation data bolsters the bet that the Fed will tighten monetary policy faster than expected. Both the PPI and CPI in the US is reaching multi-year highs which suggest that the inflation is persistent rather than transitory.

Equities were mixed when the Dow Jones fell 0.44% to 35,921 while the S&P500 added 0.06% to 4,649. The UST 10-year yield benchmark remained stable at 1.549% as the bond market was closed for the Veteran Day holiday. Gold surged 0.68% to US$1,862/oz as investors rushed in to the precious metal as a hedge against the inflation.

The euro dropped 0.24% to close at 1.145 hitting 15-month low amidst surging dollar. Macroeconomic projection by the European Commission (EC) has been revised higher to 5% this year, compared to 4.8% during previous forecast in July. The Eurozone outlook depends heavily on two factors as stated by the EC; the evolution of the COVID-19 pandemic and the pace at which supply adjusts to the rapid turnaround in demand following the re-opening of the economy.

The British pound was also on the weak foot when it lost 0.25% to 1.337. Preliminary estimates showed that the UK economy grew 6.6% y/y in Q3 2021, slowing from a record 23.6% growth in Q2 and below market forecasts of 6.8%. On quarterly basis, the GDP grew 1.3%, which is much lower than in Q2 and missing forecast of 1.5%. It was driven by hospitality (30%), arts and recreation (19.6%) and health (3.5%) following the further easing of restrictions and reopening of the economy.

The Japanese yen weakened by 0.13% to close at 114.06. Producer price index rose by 8.0% y/y in October, the most since January 1981 and highlighting the ongoing inflation pressure across the globe.

In the meantime, the Chinese yuan weakened as well by 0.04% to 6.491. Traders and investors are awaiting a virtual meeting between Chinese leader Xi Jinping and U.S. President Joe Biden to be held by next week for further Sino-US relationship.

Crude oil was closed higher following a report that OPEC cuts its world oil demand forecast for the last quarter of 2021. The cartel said that it expects oil demand will average 99.5mil barrels per day (bpd), down 330K bpd from previous forecast. Brent climbed 0.28% to US$83 per barrel while the WTI added 0.31% to US$81 per barrel.

Malaysia Highlights:

The ringgit weakened by 0.41% to 4.171, the fastest pace since late September. It was traded with high of 4.1715 and low of 4.1537. We suspect that this is due to the broad strengthening of the dollar and ahead of Malaysia’s 3Q21 GDP data that is due to be released today. Our in-house projection suggests a contraction of 1.5% before bouncing back to 1.9% growth in the last quarter to possibly achieve 4.0% growth for full year 2021.

The FBM KLCI dropped further by 0.12% to close at 1,519. Detailed transactions showed that both the retailers and foreign investors were the net buyers with RM46.1mil and RM83.2mil, respectively, while the being offset by the net selling positions of local institutions with RM129.3mil.

Over to the local bond market, the yield curve shifted higher; 3-years +5.0bps to 2.680%, 5-years +6.0bps to 3.170%, 7-years +7.5bps to 3.460%, and 10-years +4.5bps to 3.550%.

The IRS yield was closed higher when the (3Y) +6.5bps to 2.760%, (5Y) +4.0bps to 2.975%, (7Y) +3.5bps to 3.200%, and (10Y) +5.0bps to 3.380%.

Against major currencies, the ringgit strengthened against; EUR by 0.57% to 4.781, GBP by 0.68% to 5.582, and AUD by 0.63% to 3.043, but weakened against JPY by 0.18% to 3.656, and against CNY by 0.36% to 1.533. Regionally, the ringgit mostly depreciated as it lost against; THB by 0.40% to 7.873, IDR by 0.24% to 3,423, PHP by 0.21% to 12.034, and against VND by 0.41% to 5,433.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1493 and 4.1561 while our resistance is pinned at 4.1700 and 4.1772.

Source: AmInvest Research - 12 Nov 2021