• OPEC+ sticks to 400bpd output increase plan

• MYR to fluctuate in the range of 4.1810 and 4.1920 against US dollar

Global Highlights

The dollar index extended its gains, rising 0.05% to 96.262 despite the US reporting a pandemic record of over 1 million new infections on Monday. On the data front, the ISM Manufacturing PMI in the US fell to 58.7 in December 2021 from 61.1 in the previous month (cons. 60). The figure pointed to the weakest growth in factory activities since January 2021. Also, the number of job openings decreased to 10.5mil in November from 11.0mil in the previous month (cons. 11.07mil)

Equities was mixed as the Dow Jones climbed 0.59% to extend to another record high of 36,800 while the S&P 500 declined 0.06% to 4,794. The UST 10-year benchmark yield added 1.9bps to 1.647%. Gold recovered some of the previous day’s losses as it gained 0.73% to US$1,815/oz.

Due to the higher dollar, the euro fell for the second consecutive day by 0.09% to trade at 1.129. Among local data, the seasonally adjusted unemployment rate in Germany slid to 5.2% (cons. 5.3%), while the annual inflation rate in France stood at 2.8% (cons. 2.9%).

The British pound rebounded, up 0.37% to 1.353. The final CIPS/Markit Manufacturing PMI in the UK was down to 57.9 in December 2021, from 58.1 in the previous month (cons. 57.6). The number of mortgage approvals for house purchase, which is an indicator of future borrowing, was little changed at 67.0K in November, the lowest since June 2020.

The Japanese yen eased significantly by 0.73% to its weakest in 5 years at 116.16 as markets assessed the divergence of stance between the Federal Reserve and the Bank of Japan. Markets also grew optimistic on the economic outlook, with a Kyodo News survey on Sunday showing that 84% of firms in Japan see economic growth in 2022. The survey of 106 companies, which includes Toyota and SoftBank, cited recovering personal consumption as a driving force this year amid hopes that the pandemic will subside, and the situation will return to normal.

In the meantime, the Chinese yuan weakened 0.26% to 6.373 as the markets worried over the shrinking yield gap between the US and China, fuelled by expectations of possible US rate hikes this year. This is amidst the decision for the year 2022 by the China Foreign Exchange Trade System (CFETS) to increase the US dollar's weighting in the CFETS currency basket to 19.88% from 18.79% and raise the euro's weighting to 18.45% from 18.15%.

Crude oil was in the green again as Brent climbed 1.29% to US$80 per barrel, almost to its highest since Omicron was first reported, and WTI rose 1.20% to US$77 per barrel. OPEC+ agreed to stick to its planned increase by 400K barrels per day in oil output for February based on expectations that Omicron will not have a significant impact on global energy demand.

Malaysia Highlights:

The ringgit weakened for the second day straight as it eased 0.34% to 4.187, the lowest level this week. It was traded within the range of 4.1875 and 4.1722.

The local bourse’s FBM KLCI took a hit again, falling 0.46% to close the day at 1,542. Detailed transactions revealed that foreign investors were net buyers with a RM22.3mil net position but being offset by net selling that came from local institutions and retailers.

The local bond market saw rising yields in line with the UST. 3-year benchmark yield +3.0bps to 2.830%, 5-year +6.5bps to 3.230%, 7-year +3.0bps to 3.440%, and 10-year +6.0bps to 3.645%.

The IRS yields also went up when the (3Y) +2.5bps to 2.805%, (5Y) +3.5bps to 3.025%, (7Y) +4.0bps to 3.245%, (10Y) +5.3bps to 3.450%. KLIBOR was still flat at 2.050%.

Against major currencies, the ringgit was mixed as it appreciated vs. the EUR by 0.12% to 4.732, AUD by 0.26% to 3.020, and JPY by 0.33% to 3.606%, but depreciated vs. the CNY by 0.07% to 1.522, and GBP by 0.10% to 5.648. Regionally, the ringgit was mixed as well against its peers as it strengthened vs. the SGD by 0.08% to 3.090, and PHP by 0.24% to 12.253, but weakened vs. the THB by 0.32% to 7.947, IDR by 0.01% to 3,418, and VND by 0.52% to 5,437.

MYR Outlook For The Day 

We expect the MYR to trade between our support level of 4.1780 and 4.1810 while our resistance is pinned at 4.1920 and 4.1950.

Source: AmInvest Research - 5 Jan 2022