• Dollar hits 5-year high amidst Russia cutting off gas supplies to Bulgaria and Poland

Global Highlights

Dollar Index – The dollar posted a 0.64% increase to trade around 102.95, almost approaching the 103 level last seen in 2016. The US trade deficit increased by 18% in March 2022 to US$125.3 billion, due to stronger demand for imported goods and higher prices that are tied to global inflation. The surge in imports could be due to front-loading as businesses were pricing in for a continued supply chain disruption caused by the war in Ukraine.

US equities and sovereign – Wall Street was choppy with the Dow Jones inching higher by 0.19% to 33,302, the S&P 500 up 0.21% to 4,184 and the Nasdaq contracting by a slight 0.01% to 12,489. The yield differential between the UST10 and UST2 has narrowed to 24.1bps where the UST2 was at 2.591% while the UST10 was at 2.832%.

Euro – The euro declined 0.76% to 1.056. The euro continued to worsen against the US dollar as investors in Europe continued to remain worried about the energy supply and the possibility of a recession. The further decline was in response to Russia state energy enterprise Gazprom halting natural gas supply to Poland and Bulgaria, and the Russian payment demand in rubles.

British pound – The pound dipped 0.23% to 1.255. Inflation in the UK is likely to exacerbate, as research showed that Brexit-related trade barriers have contributed a 6% increase in food prices.

Japanese yen – The yen weakened 0.94% to 128.43. The Bank of Japan is expected to maintain its ultra-accommodative monetary policy despite the yen’s sharp fall. There was a debate whether the central bank should adjust its stance to support the currency. But the governor might not be pressured to do so, as it will bring inflation closer to the 2% target.

Chinese yuan – The yuan edged down by 0.06% to 6.561. The Chinese government had committed to boosting infrastructure construction projects in Beijing, responding to the slowing economic growth because of its zeroCovid policy.

Korean won – The won also fell, lower by 1.21% to 1,265.73. South Korea’s economic growth in the first quarter slowed from 1.2% in the fourth quarter of 2021 to 0.7% in the first quarter of 2022. The contraction in private consumption was the main reason for the slowdown as it shrank by 0.5 due to Covid-19 restrictions earlier this year.

Australian dollar – The Aussie dollar gained 0.04% to 0.713. Inflation in Australia surged at the fastest pace in 20 years, increasing from 3.5% in the fourth quarter of 2021, to 5.1% in the first quarter of 2022. The main impetus for the high inflation was higher prices in fuel and housing, reflecting the surge in global commodity prices. This could justify the Reserve Bank of Australia’s move to normalise its policy in keeping price pressure in check.

Commodities Highlights

Crude oil – Brent gained modestly by 0.31% to US$105 per barrel and WTI’s price also increased by 0.31% to US$102 per barrel. According to data by the US Energy Information Administration, the crude oil inventory only rose by 0.69mil barrels, much lower than the market expectation of 2mil barrels.

Gold – The gold price declined 1.02% to US$1,886/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit slipped 0.06% to 4.359. On the macro front, the Malaysian government is lifting more Covid-related restrictions, including abolishing the face mask mandate outdoors, and a shorter quarantine requirement, which will take effect 1 May 2022.

KLSE – The FBM KLCI declined 0.67% to 1,586, dragged by the industrial products & services and healthcare sectors. Trading activities saw net selling from local institutions at RM72.6mil. Local retailers and foreign investors were net buyers at RM41.5mil and RM31.mil respectively.

Fixed Income – The MGS benchmark for the 3-year was down 2.0bps to 3.600%, 5-year down 3.5bps to 3.910%, 7-year down 3.0bps to 4.380%, and 10-year up 1.0bps to 4.350%.

Rates – The IRS yield for the (5Y) -1.5bps to 3.840%, (7Y) -0.4bps to 4.060%, and (10Y) +1.0bps to 4.280% but the (3Y) was unchanged at 3.425%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.2900 and 4.3100 while our resistance is pinned at 4.4000 and 4.4200

Source: AmInvest Research - 28 Apr 2022