• Western allies pressured to intensify sanctions on Russia

• MYR to fluctuate between 4.2030 and 4.2500 against USD

Global Highlights

Dollar Index – The Dollar Index started the week on a strong footing as it rose 0.37% to 99.00, following the prospect of new sanctions by European countries on Russia after an allegation of a war crimes. Factory orders fell 0.5% m/m in February, the first contraction in 10 months. After being a bright spot during the pandemic recovery, we may see weakening demand for factory goods moving forward amidst exacerbated supply chain woes and geopolitical tension.

US equities – Wall Street closed higher as the Dow Jones rose 0.30% to 34,922, the S&P 500 climbed 0.81% to 4,583, while the tech heavyweight Nasdaq gained 1.90% to 14,533. The benchmark UST10-year yield added 1.3bps to 2.395% as the 10/2 yields inverted again on Monday with the difference in yields of -2.7bps.

Euro – The euro fell 0.64% to 1.097 as more sanctions on Russia could roil the already pressured Russia’s economy and indirectly, the euro economy itself. On another note, Germany will temporarily take control of a unit of Gazprom in the country as it seeks to safeguard the security of its gas supply.

British pound – The pound inched higher by 0.02% to trade around 1.312. Bank of England deputy governor Jon Cunliffe emphasized the need to be cautious as he stated that the central bank may not need to act sustainably to make sure that inflation expectations are not imbedded in public thinking. He also said that the Monetary Policy Committee needs to use its policy tools “carefully and flexibly”.

Japanese yen – The yen further weakened by 0.22% to 122.79, still near its 7- year low it reached last week. Over the weekend, former prime minister Yoshihide Suga urged the government the draw up a supplementary budget for fiscal year of 2022 to help mitigate the impact of rising prices. If it materializes, it will be on top of the easy money policies as every other country is tightening their policy. Also, sentiments in the economy remained grim as the Japan is still reluctant to open its border to international travellers.

Chinese yuan – The yuan remained stable at 6.363 as Covid-19 disruptions on the local economy are causing concerns among investors.

Korean won – The won strengthened slightly by 0.09% to 1,214.45. South Korea's new Covid-19 cases dropped to the lowest tally in six weeks Monday, but there are lingering concerns of another spike over the eased virus curbs.

Australian dollar – The Aussie dollar gained 0.63% to 0.754, a level we have not seen since last October as the focus now will be on the Reserve Bank of Australia (RBA). The market is expecting the central bank to keep its interest rate at 0.10% as RBA governor Philip Lowe said that the policymakers are willing to be patient before changing anything and still want to see a marked improvement in wages growth.

Commodities Highlights

Crude oil – Oil prices soared as investors worried over tighter supplies following allegations of Russia of war crimes, which in turn, prompted Western allies to impose further sanctions on Russia. Brent surged 3.01% to US$107 per barrel while the WTI jumped 4.04% to US$103 per barrel.

Gold – Gold rose 0.37% to US$1,932/oz on the prospect of more sanctions.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened 0.18% to trade around 4.220 and traded within the range of 4.2205 and 4.2105.

KLSE – The FBM KLCI fell 0.22% to 1,599 as losses were seen in the financial services and REITs and despite the positive performances in the regional indices. Detailed transactions suggest that the foreign investors were the net buyers with RM93.3mil, offset by the local institutions and retailers buying flow of RM47.1mil and RM46.2mil, respectively.

Fixed Income – The local bond market started the week on cautious note due to higher global yields. The 3-year benchmark +2.0bps to 3.210%, 5-year +0.5bps to 3.435%, 7-year +0.5bps to 3.815%, and 10-year +3.5bps to 3.935%.

Rates – The IRS yield curve also shifted higher especially towards the longer duration. The (5Y) +0.5bps to 3.445%, (7Y) +3.0bps to 3.605%, (10Y) +3.0bps to 3.840%, but the (3Y) remained at 3.130%. KLIBOR remained unchanged at 1.970%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2000 and 4.2030 while our resistance is pinned at 4.2500 and 4.2530.

Source: AmInvest Research - 5 Apr 2022