• BoE hikes key interest rate to 0.50%; ECB turns hawkish

• MYR to fluctuate in the range of 4.1810 and 4.1915 against US dollar

Global Highlights

The dollar index fell 0.58% to 95.379, the lowest since mid-January, due to the rising interest rate by the Bank of England (BoE) and hawkish turn by the European Central Bank (ECB). Among local data, the ISM Services PMI fell to 62 in December from a record high of 69.1 in the month before (cons. 66.9). The number of new claims for unemployment benefits fell to 238K last week, the lowest reading in 3 weeks (cons. 245K).

Equities snapped its 4-days of gains as the Dow Jones sank 1.45%% to 35,111 while the S&P500 plunged 2.44%% to 4,477. The UST 10-year benchmark yield added 5.5bps to 1.831%. Gold cut some gains as it lost 0.11% to trade at US$1,805/oz.

The euro jumped 1.19% to 1.144, extending fourth days of gains following the hawkish pivot by its central bank. The ECB decided to maintain its key interest rate at record low during its Thursday meeting; deposit rate at -0.50%, main refinancing at 0.00%, and marginal lending facility at 0.25%. While the economic outlook is expected to be robust for the year 2022 as stated by the ECB’s President Christine Lagarde, she acknowledged that inflation may run higher than expected in the near-term, and did not repeat previous remarks that interest rates in the area were not likely to rise this year.

The British pound benefitted from the BoE back-to-back rate hike as it soared gained 0.15% to 1.360. During its Thursday’s meeting, the BoE raised its key interest rate by a quarter point to 0.50%, whereby 4 of the 9 MPC officials had voted for a more aggressive tightening. Also, officials foresee that inflation in the UK could reach 7% and flagged further tightening throughout the year.

The Japanese yen eased 0.45% to 114.97 following the dovish remarks from BoJ’s deputy governor Masazumi Wakatabe. He said that the BOJ must maintain its massive stimulus programme. It would cripple the recovery process if the central bank tighten the monetary policy before inflation reaches the BoJ’s target.

In the meantime, the Chinese yuan remained stable at 6.361 amidst week-long Lunar New Year holiday.

Crude oil continued to be on the upside as the Brent soared 1.83% to trade at US$91 per barrel while WTI price surged 2.28% to US$90 per barrel, a level we have not seen since 2014. Oil prices remained bullish on the back of supply worries due to the Ukraine-Russia tension and winter storm effects in the US. Also, the OPEC+ cartel agreed during its recent meeting to stick to monthly increase of 400K barrels per day.

Malaysia Highlights:

The ringgit strengthened slightly by 0.02% to 4.184, and traded within the range of 4.1848 high and 4.1775 low.

The FBM KLCI jumped 0.89% to 1,526 with strong buying interests in selected sectors. Detailed transactions showed that both the retailers and foreign investors were the net buyers with RM8.6mil and RM9.5mil, respectively, while being offset by the local institutions as the net buyers.

The local bond market was quiet as many traders were still on CNY leave. The benchmark yields were mixed with 3-years - 2.0bps to 2.810%, 5-years -3.0bps to 3.250%, and 10-years -2.0bps to 3.660%, but the 7-years +1.0bps to 3.530%.

The IRS yield curve flattened when the (3Y) remained at 2.875%, but (5Y) -2.0bps to 3.135%, (7Y) -2.0bps to 3.330%, (10Y) - 3.1bps to 3.530%. KLIBOR remained at 1.970%.

Against major currencies, the ringgit was mixed as it weakened vs. EUR by 0.94% to 4.722, vs. GBP by 0.25% to 5.673, but strengthened vs. AUD by 0.39% to 2.977, vs. JPY by 0.50% to 3.639, and vs. CNY by 0.04% to 1.520. Regionally, the ringgit was mixed as well as it weakened vs. SGD by 0.04% to 3.103, vs. THB by 0.11% to 7.925, vs. PHP by 0.17% to 12.202, but strengthened vs. IDR by 0.27% and flattened vs. VND at 5,409.

MYR Outlook For The Day 4 February 2022

We expect the MYR to trade between our support level of 4.1790 and 4.1810 while our resistance is pinned at 4.1915 and 4.1935.

Source: AmInvest Research - 4 Feb 2022