• Hawkish Fed triggers global sell-off

• MYR to fluctuate in the range of 4.2070 and 4.2235 against US dollar

Global Highlights

The dollar index rose slightly by 0.15% to 96.320 following the hawkish turn by the Fed as indicated by its latest FOMC meeting minutes. On the data front, the ISM Services PMI fell to 62 in December from a record high of 69.1 in the previous month (cons. 66.9). Also, the weekly labour market indicator, the number of new claims for unemployment benefits increased to 207K in the week ending 1 Jan from 200K in the previous period (cons. 197k). Other than that, the US trade deficit widened to US$80.2bil in November from a US$67.2bil gap in October. All eyes will focus on the non-farm payrolls data tomorrow to further gauge Fed’s moves.

Equities remained on the losing side when the Dow Jones shed 0.47% to 36,236 and the S&P 500 lost 0.10% to 4,696, in tandem with the global sell-off. The UST10-year benchmark yield extended its rising trend as it added 1.6bps to 1.721%, a level we have not seen since April 2021. Gold nosedived 1.06% to US$1,791/oz., the lowest in a week on the prospect that the Fed will raise interest rate.

The euro fell by 0.15% to 1.130 and the British pound eased 0.18% to 1.353.

The Japanese yen strengthened 0.24% to 115.83 following the movement in Japanese government bond yields in tandem with the rising UST yields. As a result, the BoJ offered on Thursday to buy medium- and super-long government bonds, along with a separate offer to pump two trillion yen (US$17.22bil) into markets between Jan 7 and 14.

In the meantime, the Chinese yuan weakened significantly by 0.30% to 6.383 as the PBoC is expected to continue easing its monetary policy to smoothen the economic slowdown.

Crude oil extended its rally as Brent soared 1.47% to US$82 per barrel while WTI surged 2.07% to US$79 per barrel. A political unrest in Kazakhstan and supply outages in Libya, both signalling potential production disruptions, helped propelled crude to continue trading higher.

Malaysia Highlights:

The ringgit depreciated by 0.47% to 4.214 on firmer support towards the USD due to a hawkish Fed. The local currency was traded within a high of 4.2153 and low of 4.1962.

The FBM KLCI mirrored the global sell-off, tumbling 0.94% to 1,533. Detailed transactions revealed that the outflow was driven by net selling coming from foreign investors with RM120.7mil, offset by net buying from RM83.1mil and RM37.6mil from local institutions and retailers.

The local bond market saw higher yields traded throughout the day; the benchmark 3-year was -1.0bps to 2.820%, 5-year +4.0bps to 3.270%, 7-year +4.0bps to 3.480% and 10-year +6.5bps to 3.685%.

The IRS yield curve shifted higher as well as the (3Y) +3.5bps to 2.820%, (5Y) +5.7bps to 3.070%, (7Y) +2.8bps to 3.255%, (10Y) +3.0bps to 3.480%. KLIBOR dropped another 1.0bps to land at 2.020%.

Against major currencies, the ringgit was mixed. It depreciated vs. the EUR by 0.46% to 4.763, GBP by 0.15% to 5.689, JPY by 0.61% to 3.635, and CNY by 0.16% to 1.515, but appreciated vs. the AUD by 0.79% to 3.016. Regionally, the ringgit was also mixed against its peers. It strengthened vs. the THB by 0.60% to 7.968, but weakened vs. the SGD by 0.08% to 3.096, IDR by 0.33% to 3,415, PHP by 0.05% to 12.147, and VND by 0.48% to 5,399.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.2040 and 4.2070 while our resistance is pinned at 4.2235 and 4.2265.

Source: AmInvest Research - 7 Jan 2022