• Brent hits 7-year high on supply concerns

• MYR to fluctuate in the range of 4.1850 and 4.1980 against US dollar

Global Highlights

The trade-weighted dollar index took a breather from its recent bull run as it eased 0.23% to 95.510, tracking the slipping US Treasury yields, but remained buoyed by the increasing prospects of a rate hike in March 2022. US President Joe Biden said in his first conference for the year that he “is not ready” to remove tariffs on Chinese imports, set by his predecessors, adding uncertainties to the global political space.

Equities lost its strength for the second consecutive day as the Dow Jones plunged 0.96% to 35,029 while the S&P 500 nosedived 0.97% to 4,533 following weak earnings' reports and higher Treasury yields. The UST10-year yield was down 0.9bps to 1.865%. Gold soared 1.48% to US$1,841/oz.

The euro rose by as much as 0.16% to trade at 1.134. Among local data, the ZEW Indicator of Economic Sentiment for the eurozone increased to 49.4 in January of 2022, its highest since July 2021. At the same time, the same indicator for German jumped to 51.7 (cons. 32.0).

The British pound was on stronger footing as it climbed 0.12% to 1.361. On the data front, the UK unemployment rate slipped to 4.1% in the three months to November 2021 (cons. 4.2%), pointing towards a stronger labour market. Also, the number of people claiming for unemployment benefits fell by 43.3K in December of 2021. Also, the annual inflation rate increased to 5.4% in December 2021 from 5.1% in November (cons. 5.2%). It is the highest reading since March 1992 as inflationary pressures persist.

The Japanese yen firmed by 0.24% to 114.330. On Tuesday, the Bank of Japan decided to keep to its ultra-loose monetary policy, specifically, maintaining its key short-term interest rate unchanged at -0.1% and that for 10-year bond yields at around 0% by an 8-1 vote. At the same time, officials revised the inflation projection for the year 2022 to 1.1% from 0.9% previously and GDP growth to 2.8% from 3.4%.

In the meantime, the Chinese yuan strengthened 0.12% to trade at 6.345. The Chinese economy expanded 4.0% y/y in the fourth quarter of 2021, down from a 4.9% growth in the previous quarter (cons. 3.6%). It was the slowest pace of expansion since 2Q 2020. amid multiple headwinds including a property downturn, supply chain issues, and Covid-19 outbreaks. For the full year of 2021, the economy grew by 8.1% y/y.

Crude oil flirted at its 7-year high as the market was rattled by supply concerns again due to the outage in a pipeline from Iraq to Turkey which stopped flows briefly. Brent jumped 1.06% to US$88 per barrel while WTI surged 1.79% to US$87 per barrel.

Malaysia Highlights:

The ringgit extended its losses as it weakened by 0.27% to 4.194, and was traded within a range of 4.196 and 4.1842 ahead of BNM’s MPC meeting that will be held today. We expect that BNM to keep its OPR at 1.75% this time around.

The FBM KLCI slid 0.82% to 1,530, retreating from last week’s high of 1,570, in tandem with regional performances. Detailed transactions showed that both local institutions and foreign investors were net sellers with RM13.5mil and RM27.7mil positions, respectively, while being offset by the net inflow from retail investors.

The local market saw a bond sell-off, reflecting the global bond movement. The 3-year benchmark was +2.5bps to 2.860%, 5- year +5.0bps to 3.300%, 7-year +5.0bps to 3.500%, and 10-year +12.5bps to 3.730%.

The IRS yields saw an upward shift as well; the (3Y) +6.0bps to 2.890%, (5Y) +7.0bps to 3.175%, (7Y) +7.1bps to 3.380%, and (10Y) +6.0bps to 3.600%. KLIBOR remained at 1.970%.

Against major currencies, the ringgit was mixed as it strengthened vs. EUR by 0.47% to 4.756, and vs. GBP by 0.07% to 5.703, but weakened vs. AUD by 0.46% to 3.020, vs. JPY by 0.52% to 3.668, and vs. CNY by 0.40% to 1.513. Regionally, the ringgit lost its upper hand as it weakened vs. SGD by 0.24% to 3.109, vs. THB by 0.73% to 7.854, vs. IDR by 0.07% to 3,425, vs. PHP by 0.27% to 12.275, and vs. VND by 0.45% to 5,416.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1820 and 4.1850 while our resistance is pinned at 4.1980 and 4.210.

Source: AmInvest Research - 20 Jan 2022