• Market players await Fed Reserve’s decisions tonight

• MYR to fluctuate in the range of 4.2250 and 4.2390 against US dollar

Global Highlights

Overnight, the dollar index rose 0.26% to its more than 2-week high at 96.571 following the release of the US Producer Price Index (PPI). According to the US Department of Labor, the headline PPI figure accelerated by 9.6% y/y in November, compared to 8.6% in the previous month (cons. 9.2%), adding to concerns over inflationary pressure in the US ahead of the Fed’s decision due later tonight. The market’s expectation is that the central bank may accelerate the tapering process, opting earlier interest rate hike amidst the economic recovery despite concerns over Omicron.

Equities extended its losses as the Dow Jones fell 0.30% to 35,544 while the S&P 500 declined 0.75% to 4,634. The UST10-year benchmark yield traded higher by 2.5bps at 1.441%%. Gold, meanwhile, slid by 0.89% to US$1,771/oz.

The euro slipped 0.22% to 1.126. Data showed that industrial production in the Eurozone rose 3.3% y/y in October, lower than 5.1% growth in the previous month (cons. 3.2%).

The British pound conversely, climbed 0.11% to 1.323, the highest this week. The number of people claiming unemployment benefits in the UK declined by 49.8K in November following a 14.9K drop in October which marked the 9th consecutive monthly decline, as the economy recovers from the coronavirus hit, while the unemployment rate touched 4.2%, the lowest since June 2020 (cons. 4.2%).

The Japanese yen weakened by 0.14% to 113.70. Industrial production in Japan shrank 4.1% in October 2021 y/y. On a monthly basis, the index rose 1.8%, posting the first growth since June 2021.

The Chinese yuan remained flat at 6.367 ahead of the Fed’s decision and amidst the PBoC’s effort to cool down the firming yuan. On the pandemic development, the southern city of Guangzhou reported China’s second imported case of Omicron on Tuesday after the first was detected in the northern city of Tianjin. Also, thousands of people in the manufacturing province of Zhejiang went into quarantine due to a recent outbreak of Covid. This has sparked concerns on the disruption of the global supply chain network.

Crude oil market was shaky following the statement by the IEA saying that the Omicron variant may disrupt global progress towards recovery. Brent tumbled 0.93% to US$74 per barrel while WTI dropped 0.79% to US$71 per barrel.

Malaysia Highlights:

The ringgit shed 0.08% to 4.232 due to the stronger dollar. It was traded with a high of 4.236 and low of 4.227.

The local bourse’s FBM KLCI lost 0.93% to 1,481, the lowest since November 2020, due to heavy selling pressure. The weaker closing was in tandem with most of regional stock markets ahead of the Fed’s meeting.

The local bond market continued to trade sideways. The 3-year and 10-year yields remained stable at 2.790% and 3.580% each, but the 5-year was at -1.0bps to 3.150% and 7-year -1.5bps to 3.465%.

The IRS yield movement was mixed with the (5Y) -3.0bps to 2.925%, (7Y) -1.0bps to 3.175%, but both (3Y) and (10Y) remained unchanged at 2.725% and 3.310%. Elsewhere, KLIBOR was at 2.030%.

Against major currencies, the ringgit was mixed as it appreciated vs. the AUD by 0.21% to 3.013 and vs. the JPY by 0.05% to 3.721, but depreciated vs. the EUR by 0.40% to 4.784, vs. the GBP by 0.20% to 5.594, and vs. the CNY by 0.07% to 1.505. Against its regional peers, the ringgit mostly lower as it weakened vs. the SGD by 0.18% to 3.094, vs. the THB by 0.16% to 7.898, vs. the IDR by 0.13% to 3,385, vs. the PHP by 0.23% to 11.897, but strengthened marginally against the VND by 0.01% to 5,433.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.2220 and 4.2250 while our resistance is pinned at 4.2390 and 4.2420.

Source: AmInvest Research - 15 Dec 2021