• US Treasury pulls back after recent selling pressure

• MYR to fluctuate between 4.2510 and 4.3000 against USD

Global Highlights

Dollar Index – The greenback lost 0.57% to 100.39 after reaching the 101 level. Chicago Fed president Charles Evans said that the Fed is likely to raise interest rates to 2.25%–2.50% by the end of the year and may need to raise them if further inflation persists. This is 25bps higher than our projection of 2.00%– 2.25%. On the data front, existing home sales posted the second straight month of contraction as it fell 2.7% m/m after an 8.6% contraction last month amidst a rising interest rate environment. On a side note, the IMF has slashed its global growth forecast to 3.6% this year from 4.4%, owing to Russia’s invasion and higher inflation’s adverse effects.

US equities – Wall Street was mixed with the Dow Jones rising 0.71% to 35,161, while the S&P 500 and Nasdaq fell 0.06% to 4,459 and 1.22% to 13,453, respectively. Meanwhile, the UST10Y benchmark yield pulled back as it dropped 10.4bps to 2.832%, taking a break from the recent selling. The latest data showed the yield differential between the UST10 and MGS10 was around 136bps when the latter was at 4.196%. Also, the yield differential between UST10 and UST2 has narrowed to 25.6bps when the UST2 was at 2.575%

Euro – The euro climbed 0.60% to 1.085 after reaching the recent near 2-year low. On the macro front, industrial production in the Euro Area rose 2% y/y in February, above the market forecast of 1.5%. However, it needs to be noted that the war will only be reflected in readings starting from March.

British pound – The pound went up 0.54% to trade around 1.307. A survey by Deloitte among business executives in the UK suggested that most of them are expecting the high inflation dynamics will increase their operating costs and reduce profit margins.

Japanese yen – The yen took a breather from its recent downtrend as it strengthened 0.81% to 127.86, still near the lowest level since 2002 amidst diverging stances between the BoJ and the US Fed. Also, the BoJ solidified its efforts in defending its yield target with a fresh offer to buy an unlimited amount of 10-year bonds for four consecutive sessions. The move came amidst the yield on the 10-year Japan Government Bond (JGB) hitting 0.25%, its upper limit target.

Chinese yuan – The yuan dropped significantly by 0.40% to trade around 6.419, a level we have not seen since October 2021, as the 10-year Chinese bond yield lost its advantage against the US 10-year counterpart. Also, despite the slowing growth, the PBoC kept its interest rates benchmark unchanged with the 1-year loan prime rate at 3.70% following a 10bps cut in January 2022 while the 5-year rate was unchanged at 4.60% after a 5bps cut in January.

Korean won – The won appreciated 0.05% to 1,236.

Australian dollar – The Aussie dollar rallied 1.03% to trade around 0.745 as expectations for the RBA to hike interest rate intensified following the release of the meeting minutes.

Commodities Highlights

Crude oil – The global oil market was mixed with the Brent edging 0.42% lower to US$106.8 per barrel while WTI gained 0.19% to US$102.8 per barrel. Tight supply concerns were outweighed by the weakening global growth and higher inflation level. Also, the European Commission is working an energy supply alternative in an attempt to cut the cost of banning Russian oil in persuading sceptical countries to accept those measures.

Gold – The gold price rose 0.39% to US$1,957/oz in parallel with rising interest rates in the US.

Malaysia Highlights

Malaysia ringgit – The ringgit weakened sharply by 0.65% to 4.282, the lowest level since July 2020 as the bullish dollar pushed the ringgit towards the downside and traded within the range of 4.2915 and 4.2628.

KLSE – The FBM KCI jumped 0.80% to 1,594 amidst mixed performances in regional bourses. Detailed transactions showed that foreign investors were net buyers with a RM97.4mil flow, offset by local institutions and retailers’ net selling of RM54.9mil and RM42.5mil respectively.

Rates – The IRS yield curve shifted higher with (3Y) +2.5bps to 3.310%, (5Y) +1.5bps to 3.690%, (7Y) +3.5bps to 3.885% and (10Y) +3.0bps to 4.110%.

Against major currencies – The ringgit was on the side yesterday as it depreciated against most major and regional currencies except against CNY.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2500 and 4.2510 while our resistance is pinned at 4.3000 and 4.3100.

Source: AmInvest Research - 21 Apr 2022