• Fed’s Mester emphasises importance of pushing inflation back to 2.0%

• No clarification from ECB on exact date of interest rates adjustment

Global Highlights

Dollar Index – The dollar posted a 0.45% increase to trade around 100.32. Cleveland Federal Reserve’s Loretta Mester emphasized that it is important for the Fed to keep inflation back at 2.0%. From her point of view, price stability is crucial for sustaining a healthy economy as high inflation will harm the employment condition.

US equities – Wall Street was in the red with the Dow Jones losing 0.33% to 34,451, the S&P 500 falling 1.21% to 4,393 and the Nasdaq dropping 2.14% to 13,351. The benchmark UST10-year yield added 12.9bps to 2.828%.

Euro – The euro dropped 0.55% to 1.083. The European Central Bank did not provide the exact date of when it will adjust interest rates, saying that it will do so after pulling back pandemic stimulus later this year. Inflation in the Euro Area increased to 7.5% last month, the highest reading since 1997.

British pound – The pound declined 0.35% to 1.307. The latest survey by the Bank of England suggested that banks in the UK are expecting loan defaults to rise, due to higher financing cost, higher consumer prices and rising cost of living. Plus, most banks will be cautious in giving mortgage loans for the next three months due to fears that borrowers will default their debts.

Japanese yen – The yen was traded 0.21% weaker at 125.88. According to a recent survey by Reuters, more than three-quarter of Japanese firms said that the depreciation of the yen is affecting businesses through higher operating costs.

Chinese yuan – The yuan slid 0.16% to 6.378. On the macro front, China’s FDI inflow increased by 25.6% y/y, where inflow into the high-tech industry increased by 52.9%, and high-tech manufacturing increased by 35.7%. Apart from this, Chinese authorities are not backing down their zero-Covid policy, and the implementation has severely affected economic prospects. China’s central bank could step in by easing its monetary policy to provide support to the economy by cutting the interest rate and the reserve requirement ratio.

Korean won – The won appreciated by 0.25% to 1,224.48. The Bank of Korea (BoK) increased the interest rate by 25bps to 1.50% in its latest monetary policy meeting. This is in response to the increasing inflation (4.1% in March 2022), marking the fourth interest rate hike made by the BoK.

Australian dollar – The Aussie dollar shed 0.43% to 0.742. The unemployment rate in Australia remained at 4.0% in March 2022, the lowest since the pandemic. The number of unemployed persons dropped to 551,300, while total employment increased by 17,900 to 13.390 mil.

Commodities Highlights

Crude oil – Brent increased 2.68% to US$111.70 per barrel and WTI jumped 3.63% to US$104.25 per barrel. The increase in global oil prices in the last few days reflected the potential shortage due to a possible ban on Russian oil from the European Union and large-scale lockdowns in China. Shortage is a prime concern as the latest report suggested that OPEC+ members only provided 10% of their promised supply last month while US’ stockpile release was unable to catch up with demand.

Gold – The gold price rose 0.56% to US$1,978/oz, extending its rally for the past two weeks.

Malaysia Highlights

Malaysian ringgit – The ringgit gained 0.03% to 4.231.

KLSE – The FBM KLCI slid 0.09% to 1,596 driven by net buying from local institutions and local retails at RM4.0mil and RM37.3mil respectively. Foreign investors were net sellers at RM41.8mil.

Fixed Income – The MGS benchmark for the 3-year was down 1.5bps to 3.305%, 5-year lower by 7.5bps to 3.520%, 7-year down 2.0bps to 3.930%, and 10-year lower by 2.0bps to 4.040%.

Rates – The IRS yield curve shifted downward with the (3Y) -4.5bps to 3.235%, (5Y) -7.5bps to 3.580%, (7Y) -6.5bps to 3.790%, and (10Y) -4.5bps to 4.070%.

Against major currencies – The ringgit lost against the EUR, GBP, AUD, SGD and IDR, but gained against the JPY, CNY, THB and VND. The ringgit was unchanged against the PHP.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2200 and 4.2230 while our resistance is pinned at 4.2450 and 4.2800.

Source: AmInvest Research - 15 Apr 2022