• Risk mood recovers on optimistic Omicron development

• MYR to fluctuate in the range of 4.2157 and 4.2400 against US dollar

Global Highlights

The dollar index rebounded as it rose 0.22% to 96.328 as the risk mood improved overnight due to the positive preliminary data on Omicron. Top US medical officer Dr Anthony Fauci said on Sunday that early figures from South Africa suggested that it may not be as severe as initially feared. If the final report on Omicron turns out to be positive, and worries subside, we expect that the dollar will be propelled by the hawkish Federal Reserve’s stance assuming that it remains intact.

Equities erased last week’s losses when the Dow Jones soared 1.87% to 35,227 while the S&P 500 jumped 1.17% to 4,592. The UST 10-year yield benchmark climbed 9.1bps to 1.434%. Gold declined 0.26% to US$1,779.

The euro lost 0.27% to 1.129. On the data front, the IHS Markit Eurozone Construction PMI increased to 53.3 in November from 51.2 in October, pointing to the strongest growth in the construction sector since February 2018 amid robust demand.

The British pound started the week stronger, adding 0.21% to 1.326 as investors digested the statement by Bank of England deputy governor Ben Broadbent, saying that inflation in Britain might “comfortably exceed” 5% in April 2022 and that the tight labour market may become the main source of inflation.

The Japanese yen weakened by 0.60% to 113.48 as investors' risk mood returned.

In the meantime, the Chinese yuan was stable as it was closed at 6.376 following the announcement made by the PBoC to cut the reserve requirement ratio (RRR) on 15 December for the second time this year to boost economic growth. The move is expected release as much as US$188bil liquidity into the interbank system.

Crude oil surged due to the hopeful Omicron development and the break-off in Iran talks last week. Brent surged 4.58% to US$73 per barrel while WTI soared 4.78% to US$69 per barrel.

Malaysia Highlights:

The ringgit depreciated by 0.05% to 4.233, and was traded at a high of 4.233 and low of 4.222.

The FBM KLCI dropped 1.22% to 1,483, the lowest in 13 months. Detailed transactions showed that local institutions and retailers were net buyers with RM133.9mil and RM57.9mil, respectively, while foreign investors were net sellers with RM191.8mil.

In the local bond market, the bonds prices traded firmer when the 3-year's yield fell 2.0bps to 2.670%, 5-year –1.5bps to 3.110%, 7-year -1.0bps to 3.405%, but the 10-year was +1.0bps to 3.540%.

The IRS yield curve shifted lower with the (3Y) -1.0bps to 2.655%, (5Y) -2.5bps to 2.850%, (7Y) -2.0bps to 3.100, but the (10Y) remained unchanged at 3.310%. Elsewhere, the KLIBOR held steady at 1.990%.

Against major currencies, mostly on the stronger side as it strengthened vs. GBP by 0.15% to 5.609, vs. AUD by 0.34% to 2.973, vs. JPY by 0.59% to 3.728, and vs. CNY by 0.07% to 1.507, but weakened slightly vs. EUR by 0.04% to 4.782. Against its regional peers, the ringgit was mixed. It appreciated vs. IDR by 0.11% to 3,412, vs. PHP by 0.03% to 11.914, and vs. VND by 0.73% to 5,427, but depreciated vs. SGD by 0.13% to 3.090, and vs. THB by 0.02% to 8.003.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.2117 and 4.2157 while our resistance is pinned at 4.2400 and 4.2440.

Source: AmInvest Research - 7 Dec 2021