• Fed’s James Bullard said that he will back an aggressive monetary policy tightening to fight inflation

Global Highlights

Dollar Index – The Dollar Index was up 0.15% to 99.751. The initial jobless claims declined further to 166 thousand in the week ended on 2 April 2022, the lowest level ever recorded since 1968. The latest numbers suggested that the labour market now is tighter. On the monetary policy front, the Fed’s James Bullard said that he backed an aggressive monetary policy tightening, but it should do it in a way that will not cause too much disruption to the economy.

US equities – US stocks closed higher with the Dow Jones up 0.25% to 34,584, S&P 500 up 0.43% to 4500, and the Nasdaq up 0.06% to 13,897. On US Treasuries, the spread between the 10Y and 2Y widened to 19.83 bps.

Euro – The euro was down 0.16% to 1.088. European Central Bank officials were split over how to respond to the shock related to inflation and the situation between Russia and Ukraine. Some argued for a specific end date for the asset purchase programme and interest rate increase in the 3Q due to the worsening inflation outlook, while some prefer a wait-and-see approach due to the high degree of uncertainty.

British pound – The pound rose 0.05% to 1.308. The Bank of England’s chief economist Huw Pill said that the central bank needs to approach cautiously in further tightening the monetary policy, due to uncertainty surrounding the economy. Inflation now has reached the highest level ever seen since the financial crisis at 6.2%, and growth prospects are not looking great due to the effect from the Russian-Ukraine conflict and Brexit.

Japanese yen – The yen dipped 0.12% to 123.95. The IMF cut Japan’s economic growth from 3.3% to 2.4%. The main reason for the downgrade was the situation between Ukraine and Russia which poses a downside risk to the Japanese economy. Another risk includes higher commodity prices that could dampen domestic demand and a slowing China economy that disrupts external trade.

Chinese yuan – The yuan slid 0.01% at 6.360. Large-scale lockdowns continued to dominate the news in China, where major cities such as Shanghai were affected. The Chinese government has pledged that it will use monetary policy tools to support the economy at an appropriate time. This raises the expectation that easing measures could be in place soon.

Korean won – The won shed 0.08 to 1219.18. A state-run think tank said that the South Korean economy is on a moderate recovery track but remains vulnerable to external shocks, including the Russia-Ukraine crisis and the higher commodity prices affecting businesses and consumers.
 

Australian dollar – The Aussie dollar slipped 0.43% to 0.748. On the macro front, the trade balance in Australia narrowed from A$11,786mil in January 2022 to A$7,457mil in February 2022. The narrowing of the trade balance reflected higher imports, which increased by 12.0% m/m, while exports remained flat.

Commodities Highlights

Crude oil – Brent was down 0.48% to US$100.58 per barrel while WTI also lost 0.21% to US$96.03 per barrel.

Gold – Gold gained 0.34% to US$1,931.86 per oz.

Malaysia Highlights

Malaysian ringgit – The ringgit fell 0.13% to 4.220. Moody’s is projecting Malaysia’s economy to grow by 6.0% this year, higher than our base case of 5.6%. The rating agency said that reopening international borders that will boost tourism, a high vaccination rate, and the government’s management in controlling the spread of Covid-19 are the drivers for growth this year.

KLSE – The FBM KLCI closed 0.24% lower at 1,601. Detailed transactions showed that local institutions were net sellers with RM84.1mil. Local retails and foreign investors were net buyers with RM66.7mil and RM17.4 respectively.

Fixed Income – The yield for the 3-year was down 3.0bps to 3.195%, 5-year down by 1.5bps to 3.465%, the 7-year down by 1.0bps to 3.850%, and the 10- year unchanged at 4.020%.

Rates – The IRS yields for the (3Y) was down by 3.0bps to 3.155%, (5Y) down 4.5bps to 3.505%, (7Y) up 1.5bps to 3.700%, and (10Y) down 1.5bp to 3.930%. KLIBOR remained at 1.970%.

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

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 - 8 Apr 2022