• Dollar soars amidst heavy economic data day

• MYR to fluctuate in the range of 4.2021 and 4.2177 against US dollar

Global Highlights

The dollar index surged 0.36% to 96.835 amidst heavy local economic data release. New orders for US manufactured durable goods contracted while weekly initial jobless benefit claims fell more than forecasted. Meanwhile, 3Q21 GDP figure has been revised upwardly to 2.1% compared to 2% in the first estimate, new homes sales dropped further than expected while both personal income and spending beat forecasts which signalled high inflation, and the PCE Price Index rose the fastest in its annual rate since April 2021.

Also, the last policy minutes meeting showed that policymakers were still maintaining the “transitory” inflation narrative although the outlook remains uncertain and may last longer than initially anticipated. Some of them have turned hawkish, urging the Fed to prepare to adjust the pace of tapering and rising interest rate sooner if inflation continues to run high. The combination of mostly positive economic data and a hawkish undertone in the Fed’s stance increased bets that the central bank will raise interest rate soon.

Equities were mixed when the Dow Jones fell marginally by 0.03% to 35,804 but the S&P500 climbed 0.23% to 4,701. The UST 10-year yield dropped 3.1bps to close at 1.634%. Gold declined 0.03% to US$1,789/oz.

The euro resumed its bearish trend when it fell 0.44% to 1.120 following the stronger dollar and the Ifo Business Sentiment report saying that business morale in Germany has worsened. The headline indicator contracted to 96.5 for November, marking the fifth consecutive month of contraction, due to renewed Covid concerns and supply chain disruptions.

The British pound shed 0.37% to 1.333. On the data front, the Confederation of British Industry’s order book balance surged to +26 for November, much higher than market forecast of +13 and the highest recorded in the series. This indicated a healthy industry condition amid supply chain issues.

The Japanese yen weakened 0.25% to 115.43, reaching the weakest level since early 2017. The currency found little support from the positive PMI data. A report by au Jibun Bank showed that the private sector in Japan is thriving with the manufacturing PMI climbing to 54.2 in November from 53.2 in October, the strongest growth pace since January 2018. The services PMI also did well, increasing to a more than two-year high at 52.1 from 50.7.

In the meantime, the Chinese yuan was little changed as it closed at 6.392. Despite the strong dollar recently, the yuan stayed strong due to healthy exports and year-end seasonal demand.

Crude oil pulled back when the Brent lost 0.15% to US$82 per barrel while the WTI fell 0.14% to US$78 per barrel. Investors are now focusing on how oil producers will react to the coordinated oil release from the strategic reserve.

Malaysia Highlights:

The ringgit tumbled 0.31% to close at 4.212 amidst a broad strengthening of the dollar. It traded at a high of 4.212 and low of 4.195. On the pandemic front, the government’s Covid-19 vaccination task force expanded eligibility for booster jabs to all adults aged 18 and above from the initial priority individuals aged 40 and above.

The FBM KLCI edged lower by 0.04% or 1 point to close at 1,522 amidst a lack of catalysts and mixed performance in regional bourses. Both local institutions and foreign investors were net sellers at RM37.4mil, while being offset by retailers’ net buying position.

It was another quiet day in the local bond market. The 5-year yield was +1.0bps to 3.180% while the 3-year, 7-year and 10-year remained unchanged at 2.740%, 3.415%, and 3.570%, respectively.

The IRS yield curve steepened when the (3Y) -1.0bps to 2.750%, and (5Y) -1.5bps to 2.985%, but the (7Y) remained untouched at 3.230%, and (10Y) at 3.400%. Elsewhere, the KLIBOR was stable at 1.950%.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.2001 and 4.2021 while our resistance is pinned at 4.2177 and 4.2197.

Source: AmInvest Research - 25 Nov 2021