• Fed’s Powell emphasizes need to fight inflation

• MYR to fluctuate in the range of 4.1880 and 4.2130 against the USD

Global Highlights

Dollar index – The greenback extended its winning streak as it rose 0.27% to 98.498 following US Fed chairman Jerome Powell’s statement that the Fed may hike its key rate by more than 25bps if needed at one of its meetings, in a move to properly control the inflation. The gap between the 5- and 30-year yield is now at 0.19bps.The Fed chair’s statement came in line with our view. We have factored in a 50bps hike by the Fed in the next meeting. And we have also factored in a one 25bps rate hike by Bank Negara in a move to contain the interest rates differentials.

US equities – Wall Street closed in the red as the Dow Jones fell 0.58% to 34,553, S&P 500 lost 0.04% to 4,461, while the tech heavyweight Nasdaq shed 0.40% to 13,838. The UST 10-year benchmark yield continued to climb as it added 14bps to 2.290%, a level we have not seen since May 2019.

Euro – The euro dropped for the second consecutive day as it fell 0.32% to 1.102. Market players were still assessing the fallout from the UkraineRussia tension as Ukraine refused the ultimatum by Russia to surrender Mariupol, an important port city for the Ukrainians. Also, EU nations were considering joining the US in banning Russian oil.

British pound – The pound edged lower by 0.07% to trade around 1.317. To recap, the Bank of England last week raised its interest rate to the prepandemic level, and the tone had turned more dovish due to the UkraineRussia war.

Japanese yen – The yen was on the losing side again, further weakening by 0.25% to 119.47 as the stances between the Fed and the BoJ widen.

Chinese yuan – The yuan strengthened 0.08% to 6.356 after the PBoC’s decision to maintain the interest rates for corporate and household loans, specifically the one-year loan prime rate (LPR) at 3.70% and the five-year duration rate at 4.60%. The decision was in line with our view and we still feel that the central bank will cut rates by 10bps in 2Q22. Although China’s cabinet has promised further monetary support for the economy, it was also cautious against too much market liquidity. This opened the door for a possible reduction in its reserve required ratios before lowering the policy rate.

Korean won – The won depreciated 0.74% to 1,216, amidst surging cases in South Korea which already hit new record highs of 400K new daily cases recently.

Australian dollar – The Aussie dollar slid 0.20% to 0.740 after reaching a fivemonth high lately. Australian bonds yield jumped this morning, reflecting the surging US Treasury rates.

Commodities Highlights

Crude oil – Oil prices were sent upward following EU nations mulling over banning the Russian oil imports, intensifying the prevailing oil supply worries. Brent surged 7.12% to US$115 while the WTI jumped 7.09% to US$112 per barrel.

Gold – Gold inched higher by 0.74% to US$1,935/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.21% to 4.204 and traded within the range of 4.2055 and 4.1945.

KLSE – The FBM KLCI turned red as it lost 0.26% to 1,587. Detailed transactions showed that local retailers were net buyers with RM58.34mil while being offset by local institutions and foreign investors with RM49.78mil and RM8.55mil, respectively.

Fixed Income – The local bond market was under selling pressure as the benchmark MGS yields closed higher. The 5-year was +0.5bps to 3.305%, 7- year +1.0bps to 3.575%, 10-year +1.0bps to 3.700%, but the 3-year remained unchanged at 2.690%.

Rates – The IRS yield curve shifted higher as well as the (3Y) +4.5bps to 2.955%, (5Y) +5.5bps to 3.215%, (7Y) +6.7bps to 3.420%, and the (10Y) +0.5bps to 3.605%. KLIBOR remained flat at 1.970%.

Against major currencies – The ringgit had the upper hand against the JPY and THB but fell against the EUR, GBP, AUD, CNY, SGD, PHP, IDR and VND.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.1850 and 4.1880 while our resistance is pinned at 4.2100 and 4.2130.

Source: AmInvest Research - 22 Mar 2022