• BNM maintains OPR at 1.75% as widely expected

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

Global Highlights

The dollar index rose 0.24% to trade at 95.735, recovering from the previous session’s pullback. Among local data, the number of new unemployment benefit claims, which provides a sneak peek at the weekly labour market, unexpectedly increased to 286K, the highest level since October 2021 (cons. 220K) during the last week. Other than that, existing home sales fell 4.6% to s.a. of 6.18mil in December, the lowest in 4 months (cons. 6.4mil).

Equities extended their losses as the Dow Jones tumbled 0.89% to 34,715 while the S&P 500 plummeted 1.10% to 4,483. The UST 10-year benchmark yield was sent lower by 6.0bps to 1.804%. Gold slipped 0.07% to US$1,839/oz.

The euro was traded lower by 0.27% at 1.131. The final annual inflation rate in the euro area remained at a record high of 5% in December 2021, up from 4.9% in November, as energy cost continued to soar and supply chain disruptions continue to weigh. Meanwhile, the ECB's December meeting minutes reaffirmed the central bank's stance of an unlikely rate hike in 2022 while projecting that inflation could possibly stay higher and at a longer period than previously expected.

The British pound managed to cushion the dollar's rise, slipping by a slight 0.09% to 1.360. The annual inflation rate in the UK surged to 5.4% in December 2021 from 5.1% in November (cons. 5.2%), which marked the highest reading since March 1992.

The Japanese yen firmed 0.19% to 114.11, retaining its upper hand for the second consecutive session. Japan posted a trade deficit of ¥582.3bil in December 2021, down from almost ¥1 trillion in the previous month (cons. ¥784.1bil).

In the meantime, the Chinese yuan strengthened 0.06% to 6.341 on seasonal corporate demand ahead of the Lunar New Year and stronger official midpoint fixing, seeing that the yuan remained strong despite the benchmark rate cuts. The PBoC on Thursday slashed the 1-year loan prime rate by 10bps to 3.70% and the 5-year loan prime rate by 5bps to 4.60% in an effort to reinforce the economy amidst a slowdown.

Crude oil edged lower after several days of bull run as the Brent shed 0.07% to US$88 per barrel while the WTI slipped 0.07% to US$87 per barrel. Crude stocks rose more than expected by 515K barrels last week (cons. -938k), according to the US Energy Department, but supply concerns remained.

Malaysia Highlights:

The ringgit strengthened 0.10% to 4.190 and traded within the range of 4.1925 and 4.1853 throughout the session. As expected, BNM maintained its OPR at 1.75% during its first meeting of 2022. We expect the local economy to grow around 3.4% y/y for the full year of 2021, which is within BNM’s range of 3%–4%.

The FBM KLCI closed in the red for the fourth consecutive session as it declined 0.17% to 1,528. Detailed transactions showed that local retailers and foreign investors were net buyers with RM9.6mil and RM49.8mil positions respectively, being offset by net buying from local institutions.

The local bond market saw some bargain hunting amidst attractive yields post-MPC meeting. The benchmark 3-year was - 3.0bps to 2.830%, 5-year -1.0bps to 3.290% and 10-year -4.0bps to 3.690%, but the 7-year remained flat at 3.500%. The IRS yields steepened when the (3Y) -1.5bps to 2.875%, (5Y) -2.0bps to 3.155%, (7Y) -1.5bps to 3.365%, but (10Y) was unchanged at 3.600%. KLIBOR held steady at 1.970%.

Against major currencies, the ringgit was mixed as it strengthened vs. the EUR by 0.04% to 4.755, and CNY by 0.05% to 1.514, but weakened vs. the GBP by 0.10% to 5.708, AUD by 0.30% to 3.029, and JPY by 0.08% to 3.671. Regionally, the ringgit was also mixed against its peers. It firmed against the THB by 0.06% to 7.858, but eased vs. the SGD by 0.06% to 3.111, IDR by 0.06% to 3,423, PHP by 0.09% to 12.264, and VND by 0.07% to 5,412.

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 - 21 Jan 2022