• FOMC meeting minutes signals sharply hawkish turn

• MYR to fluctuate in the range of 4.1870 and 4.2000 against US dollar

Global Highlights

The dollar index slipped 0.09% to 96.171 following the release of the minutes from the last FOMC meeting in 2021. The minutes showed that policymakers are ready for reduction in the balance sheet, and it is likely will start sometime after the central bank begins raising interest rates, given the outlook for the economy, labour market and inflation. Currently, the market is expecting the Fed to raise its key rate in March, which means that the balance sheet reduction may start before summer. On the data front, private businesses hired 807K workers in December of 2021, the highest in seven months (cons. 400K).

Equities reacted negatively to the meeting minutes as the Dow Jones declined 1.07% to 36,407 while the S&P 500 dropped 1.94% to close at 4,701. In parallel, the UST10-year benchmark yield was sent higher by 5.8bps to 1.705%. Gold lost 0.23% to US$1,810/oz.

The euro climbed 0.24% to 1.131. The World Health Organization (WHO) on Tuesday warned that even though Omicron's rates of death and hospitalisation have been lower across the world, it could increase the risk of newer and more dangerous variants emerging. Among local data, the final IHS Markit Eurozone Composite PMI was confirmed at 53.3 in December 2021, the softest expansion in private sector activity since March and below the previous month's final reading of 55.4.

The British pound rose 0.20% to 1.356 as sentiment was boosted by the UK’s Prime Minister’s statement on Tuesday that there is no need for new Covid restrictions in England despite recording another new daily record high of Covid cases.

The Japanese yen strengthened slightly by 0.04% to 116.11. Data showed that the Consumer Confidence Index in Japan was at 39.1 in December 2021, slightly down from 39.2 in November which remained the highest reading since May 2019. In the meantime, the Chinese yuan firmed 0.14% to 6.364.

Crude oil was traded slightly higher as the report by the EIA showed that US crude oil inventories fell by 2.14mil in the last week of 2021, lower than the forecast of 3.28mil drop. Brent added 1.00% to US$80.8 per barrel while WTI gained 1.12% to US$78 per barrel.

Malaysia Highlights:

The ringgit depreciated for the third day in a row, paring last week’s gains even as the dollar fell. It was traded weaker by 0.17% at 4.194, and within the range of 4.195 and 4.1875.

The FBM KLCI added 0.39% to 1,548 driven by the buying in glove stocks. Detailed transactions showed that foreign investors and local institutions were net buyers with a combined RM21.0mil inflow, offset by the outflow from local retailers.

The local bond market was quiet before the release of minutes from the FOMC meeting. The 10-year benchmark yield was - 2.5bps to 3.620%, but the 3-year, 5-year and 7-year remained unchanged at 2.830%, 3.230%, and 3.440%, respectively.

The IRS yields shifted lower when the (3Y) -2.0bps to 2.785%, (5Y) -1.2bps to 3.013%, (7Y) -1.8bps to 3.227%, and (10Y) remained at 3.450%. KLIBOR dropped 2.0bps to close at 2.030%.

Against major currencies, the ringgit was lower across the board as it depreciated vs. the EUR by 0.20% to 4.742, vs. GBP by 0.57% to 5.680, vs. AUD by 0.67% to 3.040, vs. JPY by 0.20% to 3.613, and vs. the CNY by 0.33% to 1.517. Regionally, the ringgit was mixed against its peers. It weakened vs. the SGD by 0.11% to 3.093, vs. THB by 0.34% to 7.920, vs. PHP by 0.81% to 12.154, and vs. the VND by 0.22% to 5,425, but strengthened vs. the IDR by 0.23% to 3,426.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1840 and 4.1870 while our resistance is pinned at 4.2000 and 4.2030.

Source: AmInvest Research - 6 Jan 2022