• Market responds to Fed chair’s comment on possibility of 50bps rate hike in upcoming FOMC meeting

Global Highlights

Dollar Index – The Dollar Index was up 0.27% to 98.498. The dollar was boosted after the hawkish tone by the Fed chair recently, while the bearish sentiment regarding the overall economic outlook in the US continued to dominate. Several other Fed officials also resonated the tone, including San Francisco Fed president Mary Daly, saying that it was time to remove policy accommodation with both St Louis Fed president James Bullard and Cleveland Fed’s Loretta Mester preferring a faster pace for interest rates normalization.

US equities – US stocks were mixed, where the Dow Jones gained 0.80% to 34,755, S&P 500 up 1.17% to 4,463, while the Nasdaq slid 0.40% to 13,838. The equity market continued to be on a strong footing. On US Treasury yields, the spread between the 10Y and 2Y now has narrowed to 0.2%.

Euro – The euro gained 0.12% to 1.103. Sentiments in the Eurozone continued to be clouded by the situation in Ukraine, and the recent comment by the Fed chair on the possibility of a 50bps rate hike in the upcoming meeting dragged the Euro weaker.

British pound – The pound gained 0.71% to 1.326. On the macro front, the CBI industrial orders increased to 26, the highest level since November 2021 as manufacturers in the UK reported a higher order book. Despite the stronger orders, the survey suggested that manufacturers have to face the high cost pressure due to the conflict in Ukraine, and this could push consumer prices higher in the UK.

Japanese yen – The yen slid 0.25% to 119.470. The yen traded lower due to the comments made by Fed chair Jerome Powell regarding the possibility of a 50bps rate hike in the upcoming FOMC meeting.

Chinese yuan – The yuan shed 0.22% to 6.361. Due to global economic slowdown, the China’s government said that it will continue to support the economy and the capital market. On Covid-19 related news, the city of Shenzhen continued to be under a lockdown with authorities reporting around 4,000 new confirmed cases. Due to the zero-tolerance policy by authorities, this could exacerbate the supply chain disruption since Shenzhen is the base for factories, including BMW.

Korean won – The won was down 0.74% to 1216.470. Fitch Ratings recently revised its economic growth from 3.0% to 2.7% for 2022, citing rising energy prices will erode household spending and business activity.

Australian dollar – The Aussie dollar gained 0.95% to 0.747. Based on a recent survey, consumer confidence in Australia has declined amid supply chain disruptions and rising prices.

Commodities Highlights

Crude oil – Brent was down 0.1% to US$115.48 per barrel and WTI climbed 8.35% to US$102.98 per barrel. Saudi Arabia said that it would not cooperate with the US and UK in filling in the gap of oil shortages.

Gold – Gold declined 0.73% to US$1,921.69 per oz.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened 0.32% to 4.218. Recently, the OECD forecast Malaysia to record a GDP growth of 6.0% for 2022, which is higher than our base case of 5.6%. Separately, the finance minister said that Malaysia’s fiscal stance will remain expansionary this year to support the economy.

KLSE – The FBM KLCI closed 0.26% lower at 1,587. Detailed transactions showed that local retailers and foreign investors were net buyers with RM90.9mil and RM134.3mil respectively, while local institutions and foreign investors were net sellers with RM225.2mil.

Fixed Income – The yield for the 3-year was up by 2.0bps to 2.710%, 5-year up 8.0bps to 3.385%, the 7-year up +3.0bps to 3.605%, and the 10-year up 5.5bps to 3.755%.

Rates – The IRS yields for the (3Y) was up by +4.5bps to 2.955%, (5Y) up +12.5bps to 3.340%, (7Y) up +6.7bps to 3.420%, and (10Y) up +4.0 to 3.600%. KLIBOR remained at 1.970%.

Against major currencies – The ringgit weakened against most currencies including the EUR, GBP, AUD, CNY, SGD, THB, IDR, and VND. The ringgit strengthened against the JPY and PHP.

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 - 23 Mar 2022