• Fed’s March rate hike still in play

• MYR to fluctuate in the range of 4.1910 and 4.2050 against USD

Global Highlights

Dollar index – After hitting its highest since June 20202, the greenback edged lower by 0.02% to trade at 97.385. This is after Fed chair Jerome Powell’s remark that the Fed is ready to raise interest rate this month amidst high inflation and “extremely tight” labour market. However, he also noted that the outbreak of war in Ukraine brough a significant degree of uncertainty for policymakers in navigating the monetary policy. On the data front, private businesses in the US hired 475K workers in February of 2022, beating market expectations of a 388K increase.

US equities – US stocks rebounded following Powell’s reassurance that the Fed will maintains its inflation-fighting narrative amidst the Ukraine–Russia conflict. The Dow Jones surged 1.79% to 33,891, S&P 500 jumped 1.86% to 4,387, while the Nasdaq climbed 1.62% to 13,752.

Euro – The euro shed 0.05% to 1.112, extending its bearish trend for the third consecutive day as geopolitical tensions clouded the region’s economic outlook. A preliminary report showed that the annual inflation rate in the Euro Area rose to a fresh high of 5.8% in February 2022 from 5.1% in January, beating the forecast of 5.4%. This is putting pressure on the European Central Bank as the inflation landed almost three times the ECB’s target.

British pound – The pound erased previous losses as it gained 0.61% to 1.341. It remains uncertain if the Bank of England will raise interest rates in the upcoming March meeting amidst geopolitical tensions.

Japanese yen – The yen weakened 0.52% to 115.52. There was a modest pick-up in appetite for riskier currencies, pressuring the safe-haven yen.

Chinese yuan – The yuan eased 0.15% to 6.321 after hitting its highest in four years. Large foreign currency receipt holdings of onshore companies due to a trade surplus position in recent years also left the yuan somewhat immune to external risk aversion.

Korean won – The won depreciated 0.52% to 1,206. Among local data, retail sales in South Korea increased 4.5% y/y in January of 2022, manufacturing production climbed 4.4% y/y, while industrial production advanced 4.3% y/y, compared with 6.5% in market expectations.

Australian dollar – The Aussie dollar continued to benefit from rising commodities prices as it added 0.62% to 0.730, touching its highest since November 2021. Also, the sentiment surrounding the Australian economy was boosted by the faster-than-expected 4Q21 growth. Data showed that it expanded by 4.2% y/y, much higher than the 3.7% market forecast. The growth was supported mainly by a sharp rebound in household spending as the economy emerged from pandemic lockdowns.

Commodities Highlights

Crude oil – The International Energy Agency warned that global energy security is under threat due to the Russia’s invasion of Ukraine as broadening sanctions against Russia fuelled fears of further supply disruptions. In addition, OPEC+ oil producers agreed to stick to their plan for a modest output rise of 400K barrels per day in April, without mentioning Ukraine’s crisis during their talks. Brent soared 7.6% to US$113 per barrel, the highest level since June 2014, while US crude WTI jumped by 6.9% to US$111 per barrel, a level we have not seen since 2011.

Gold – The precious metal pared some gains as it fell 0.85% to US$1,929/oz but remained near its 13-month high as safe-haven seeking sentiment spurred demand towards gold.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened 0.03% to 4.195 but remained relatively stable amidst the Eastern Europe tension. It was traded within the range of 4.198 and 4.1832.

KLSE – The FBM KLCI inched higher by 0.10% to 1,598 points thanks to late buying activities. Detailed transactions showed that foreign investors and local retailers were net buyers with RM79.8mil and RM74.2mil, respectively, while being offset by net buying from local institutions at RM154.0mil.

Fixed Income – The local bond market saw some profit-taking activities, especially in the afternoon session. The benchmark yield curve shifted lower, especially at the neck, as the 5-year was -3.5bps to 3.255%, the 7- year -3.0bps to 3.520%, and the 10-year -0.5bps to 3.665%, but the 3-year remained unchanged at 2.700%.

Rates – The IRS yields went lower; the (3Y) -4.5bps to 2.860%, (5Y) -2.8bps to 3.125%, (7Y) -1.5bps to 3.335%, and (10Y) -2.5bps to 3.545%. KLIBOR remained at 1.970%.

Against major currencies – The ringgit mostly rose against the EUR, GBP, JPY, AUD, CNY, SGD, IDR, PHP, and VND but weakened against the THB.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.1880 and 4.1910 while our resistance is pinned at 4.2050 and 4.2080.

Source: AmInvest Research - 3 Mar 2022