• Fed’s balance sheet runoff is bound to happen this year

• MYR to fluctuate within the range of 4.2030 and 4.2500 against USD

Global Highlights

Dollar Index – The greenback shone as it gained 0.13% to 99.599, nearly reaching a level we have not seen in two years following a definite hawkish tone seen in the recent Fed meeting. The minutes showed that the officials would have preferred to raise the interest rate by 50bps in its March meeting but held it off due to the Ukraine-Russia war. It also showed that the policymakers “generally agreed” to cut its balance sheet up to US$95bil a month (US$60bil for Treasuries and US$35bil for MBS) over three months. The market is now expecting the process to happen as soon as May although the amount is still falling short of expectations.

US equities – Wall Street traded lower with the Dow Jones falling 0.42% to 34,497, S&P 500 down 0.97% to 4,481 and tech heavyweight Nasdaq declining 2.22% to 13,889. The UST10-year benchmark resumed its climb as it added 5.1bps to 2.598%.

Euro – The euro fell for the sixth consecutive day by 0.08% to trade around 1.090, the lowest level in a month as the EU is preparing to hit Russian coal with sanctions. This may pose challenges to Europe’s economy itself as according to data from the European statistics office, the EU imported 19.3% of its coal from Russia in 2020. On the data front, annual producer inflation reached a fresh record high of 31.4% y/y in February 2022, up from 30.6% in January (cons. 31.5% y/y).

British pound – The pound lost 0.04% to 1.307 amidst looming new sanctions on Russia. On the data front, the UK construction PMI was flat at 59.1 but still at a strong growth level.

Japanese yen – The yen weakened 0.16% to 123.80, marking the fourth straight day of falling. Nevertheless, Japan plans to ease border restrictions by lifting its entry ban on foreign nationals from 106 countries on Friday.

Chinese yuan – The yuan strengthened 0.05% to 6.360 as economic data released showed slumping economic data may guarantee that the authorities will remain accommodative this year. The Caixin Services PMI tumbled to 42.0 in March from 50.2 in the month before, the first contraction since last August amid the new wave of Covid-19 outbreaks and mobility restrictions.

Korean won – The won depreciated 0.47% to 1,218. South Korea stated it will add hundreds of international flights per week beginning May as it continues to ease anti-coronavirus measures seeing that Omicron cases have declined locally.

Australian dollar – The Aussie dollar tumbled 0.88% to 0.751.
 

Commodities Highlights

Crude oil – The oil market turned sour as member states of the International Energy Agency (IEA) will release 120 million barrels from strategic reserves. This is on top of the US release of 60 million barrels. Also, data showed that US crude oil inventories increased by 2.4mil barrels last week, as opposed to market expectations of a 2.05mil contraction. By the end of the session, Brent nose-dived 5.22% to US$101 per barrel while WTI dropped 5.62% to US$96 per barrel.

Gold – The gold inched higher by 0.09% to US$1,925/oz. It has been in a range bound trade since mid-March 2022 amid looming interest rate hikes by the Fed.

Malaysia Highlights

Malaysian ringgit – The ringgit eased 0.11% to 4.214 and traded within the range of 4.2205 and 4.2085.

Fixed Income – The local bond market saw knee-jerk selling pressure with the

benchmark 3-year +3.5bps to 3.225%, 5-year +5.0bps to 3.480%, 7-year +4.5bps to 3.860%, and 10-year +8.5bps to 4.020%.

KLSE – The local bourse FBM KLCI rebounded 0.50% to close at 1,605, driven by gains in the plantation and industrial products & services sectors. Detailed transactions showed that foreign investors and local retailers were net buyers with RM83.74mil and RM11/76mil, respectively while being offset by local institutions’ buying flow of RM95.49mil.

Rates – The IRS yield curve shifted higher; the (3Y) +8.0bps to 3.185%, (5Y) +13.0bps to 3.550%, (7Y) +9.0bps to 3.715%, and (10Y) +11.5bps to 3.945%.

Against major currencies – The ringgit appreciated going against the EUR, GBP, AUD, JPY, SGD, and PHP but depreciated against the CNY, THB, IDR, 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 - 7 Apr 2022