• Hawkish Move by BoE and ECB
• MYR to fluctuate in the range of 4.1950 and 4.2290 against US dollar

Global Highlights

The dollar index lost its appeal as it tumbled 0.49% to 96.042, a day after the Fed decided to end its pandemic-era bond buying in March and pave the way for an expected three interest rate hikes in 2022. Also, the IHS Markit Manufacturing preliminary PMI fell to 57.8 in December, which is the lowest in a year, from 58.3 in November and less than forecasts (cons. 58.5).

Equities erased their early gains when the Dow Jones lost 0.08% to 35,898 while the S&P 500 declined 0.87% to 4,669. The UST 10-year benchmark yield was down 4.6bps to 1.41%. Gold surged 1.26%% to US$1,799/oz, the highest since November 2021 as it flirted with the US$1,800 level.

The euro added 0.36% to 1.133 following the ECB’s decision to reduce its bond-buying pace under the PEPP during 1Q2022 and will stop entirely by the end of March 2022. However, it will be offset by the increase in bond-buying purchase under the APP. Meanwhile, the interest rate on the main refinancing operations, the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and -0.50% respectively.

The British pound gained 0.46% to 1.332, a level has not seen since end-November, following the BoE’s decision to raise its key interest rate from the historic low of 0.10% to 0.25%, making it the first major central bank to do so since the pandemic hit. The decision came as a surprise to the market as the central bank was expected to keep the rate intact.

The Japanese yen rebounded as it strengthened 0.32% to 113.67, ahead of the BoJ’s interest rate decision that should be due later today. The Jibun Bank Japan Manufacturing PMI declined to 54.2 in December from 54.5 a month earlier.

The Chinese yuan weakened slightly by 0.01% to 6.368 as traders became concerned on the PBoC’s move in keeping the yuan lower.

Crude oil traded in the green and recovering in a “W” shape as riskier sentiment improved following central banks' decisions. Brent gained 1.54%% to US$75 per barrel while the WTI surged 2.13%% to US$72 per barrel.

Malaysia Highlights:

MYR – The ringgit strengthened significantly by 0.50% to 4.208, the strongest since end of November 2021. It was traded with high of 4.231 and low of 4.2063.

The FBM KLCI extended its gains as it rose 0.12% to 1,485 in parallel with regional indices. It was driven by the net buying flows from local institutions and retailers with RM61.6mil while foreign investors were net sellers.

The IRS yields were mixed when the (5Y) was at -0.5bps to 2.935%, (7Y) +1.0bps to 3.170%, and (10Y) +3.5bps to 3.345%, while the (3Y) remain flat at 2.725%. Elsewhere, KLIBOR unchanged at 2.040%.

Against major currencies, the ringgit mostly outperformed when it strengthened vs. the EUR by 0.17% to 4.760, the GBP by 0.21% to 5.602, the JPY by 0.18% to 3.701, and vs. the CNY by 0.51% to 1.514, but weakened vs. the AUD by 0.53% to 3.030. Against regional currencies, the ringgit similarly retained its upper hand; it appreciated vs. the SGD by 0.17% to 3.089, the THB by 0.53% to 7.943, the IDR by 0.69% to 3,413, and vs. the VND by 0.34% to 5,468, but depreciated vs. the PHP by 0.24% to 11.864.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1900 and 4.1950 while our resistance is pinned at 4.2290 and 4.2340.

Source: AmInvest Research - 17 Dec 2021