• Mounting geopolitical tensions support dollar

• MYR to fluctuate in the range of 4.1800 and 4.1920 against US dollar

Global Highlights

The dollar index rose by 0.29% to its two-week high at 95.918 amidst heightening geopolitical tensions and heavy early IHS Markit PMI release. Also, the Fed is set to end its two-day meeting on Wednesday. The US Markit Manufacturing PMI fell to 55 in January 2022 from 56.7 in December (cons. 56.7) and marking the slowest growth in factory activity in 15 months, while the Service PMI headline figure dropped to 50.9 down from 57.6.

US equities recouped their losses, driven by dip buyers. The Dow Jones inched higher by 0.29% to 34,365 while the S&P 500 added 0.28% to 4,410. US Treasury 10-year benchmark yield gained 1.2bps to 1.771%. Gold rose 0.42% to US$1,843/oz.

Meanwhile, the euro fell 0.16% to 1.133. The Eurozone Markit Manufacturing PMI increased to 59 from 58 in December, the strongest growth in factory activity in 5 months, as supply chains gradually recover. The Services PMI dropped to 51.2 from 53.1 in the previous month.

The British pound was also on the losing side as it shed 0.48% to 1.349. The Markit/CIPS UK Manufacturing PMI slid to 56.9 from 57.9, pointing to the slowest growth in factory activity since February (cons. 57.9). The Service PMI was down to 53 from 53.6 (cons. 54.8).

The Japanese yen weakened by 0.24% to 113.95. The Jibun Bank Japan Services PMI plunged to 46.6 from 52.1, marking the first contraction in services activity in four months. On the other hand, the Manufacturing PMI inched up to 54.6 from 54.3.

In the meantime, the Chinese yuan firmed 0.12% to 6.331, its 3-and-a-half-year high, on the back of seasonal demand ahead of the Lunar New Year and stronger PBoC fixing.

Crude oil declined as the dollar strengthened amid tensions between the US and Russia over Ukraine. Also, the United Arab Emirates intercepted and destroyed two Houthi ballistic missiles targeting the Gulf country on Monday, which may provide some relief in the crude oil market. Brent fell 1.84% to US$86 per barrel while WTI shed 2.15% to US$83 per barrel.

Malaysia Highlights:

The ringgit weakened a tad by 0.08% to 4.189, and was traded between the high of 4.1918 and low of 4.1827.

The FBM KLCI declined by 0.34% to its one-month low at 1,522, which marked the six straight days of losses. Detailed transactions showed that local retailers and foreign investors were net buyers with RM5.89mil and RM60.14mil positions, offset by net outflow by local institutions.

It was a rather quiet day in the local bond market with benchmark yields had little to no movement. The 3-year and 7-year remained flat at 2.820% and 3.500%, respectively, but the 5-year +1.0bps to 3.290%, and 10-year +2.0bps to 3.690%.

The IRS yield curve steepened as the (3Y) -0.7bps to 2.848%, (5Y) -0.5bps to 3.125%, (7Y) -0.5bps to 3.330%, but +1.0bps to 3.550%. Elsewhere, KLIBOR was flat at 1.970%.

Against major currencies, the ringgit mostly stronger as it firmed vs. the EUR by 0.04% to 4.745, GBP by 0.14% to 5.672, AUD by 0.39% to 2.997 and JPY by 0.18% to 3.675, but weakened vs. the CNY by 0.20% to 1.511. Regionally, the ringgit appreciated vs. the THB by 0.05% to 7.882 and VND by 0.07% to 5,411, but weakened vs. the SGD by 0.14% to 3.115, IDR by 0.08% to 3,422 and PHP by 0.26% to 12.245.

MYR Outlook For The Day

We expect the MYR to trade between our support level of 4.1770 and 4.1800 while our resistance is pinned at 4.1920 and 4.1950.

Source: AmInvest Research - 25 Jan 2022