• Dollar remains strong ahead of inflation data release

• MYR to fluctuate between 4.3900 and 4.4200 against USD

Global Highlights

Dollar Index – The greenback was choppy and ended higher by 0.26% to 103.92, hitting a fresh 20-year high, ahead of the inflation data that is set to be released later tonight. It will be a clearer signal for the Fed’s policy path following remarks by its chair Jerome Powell dismissing a 75bps rate hike. Also, one of the officials, Raphael Bostic, also agreed with the statement while stating that there may be “two or three” half-point hike. On the data front, the NFIB Small Business Optimism Index was unchanged at 93.2 in April 2022, at a level not seen in two years.

US equities and sovereign bonds – The Wall Street was mixed as the Dow Jones edged lower by 0.26% to 32,161, marking the fourth straight day of losses, but the S&P 500 rose 0.25% to 4,001 and the Nasdaq added 0.98% to 11,738. The UST10Y benchmark yield fell 4.3bps to 2.991% while the UST2Y rose 1.9bps to 2.61%

Euro – The euro remained near 2016 lows as it fell 0.30% to 1.053. According to a survey, the majority of the FX traders are seeing the euro falling to level with the greenback as the Ukraine-Russia war and supply chain disruption magnified the stagflation risks. On another note, the ZEW Indicator of Economic Sentiment rose sharply to -29.5 in May of 2022, from an over twoyear low of -43 in April.

British pound – The pound dropped 0.13% to its lowest level in two years at 1.232 amidst a surging dollar. The BoE’s Michael Saunders, who backed for a bigger rate rise last week during the key meeting, said that he was worried inflation may exceed the BoE’s forecasts. Retail sales in the UK contracted 1.7% y/y in April 2022, lower than a 0.4% decline in the previous month, as the rising cost of living constrained consumer spending.

Japanese yen – The yen weakened slightly by 0.12% to 130.45 as the BoJ remained stubbornly dovish compared to its peers. The central bank has no plan to permit widening the long-term interest rate band from the 0.00% target to curb the sudden yen bear shocks. According to the Japanese Ministry of Finance, the government's long-term debt topped 1 quadrillion yen (US$7.67 trillion) for the first time in the fiscal year ended in March.

Chinese yuan – The yuan depreciated 0.06% to 6.735. The currency remained outweighed by the extended stringent Covid-related lockdowns and grim economic outlook.

Korean won – The won depreciated 0.19% to 1,276 as the South Korean stock market fell for the sixth consecutive day on Tuesday to hit a 17-month low. The weakening won may fuel Korean inflation and will force the BoK to tighten its policy further and faster amidst a rising interest rate environment.

Australian dollar – The Aussie dollar tumbled 0.20% to 0.694 weighed by the current negative sentiments despite its central bank RBA’s latest move of a higher-than-expected interest rate increase to 0.35%.

Commodities Highlights

Crude oil – The oil market settled lower as the oil demand outlook was pressured by coronavirus lockdowns in China and growing recession risks, added with a strong dollar which made crude more expensive for buyers using other currencies. Brent fell 3.28% to US$102 per barrel while WTI contracted 3.23% to US$99.8 per barrel.

Gold – The gold price fell 0.86% to US$1,838/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened slightly by 0.04% to 4.383 and traded within the range of 4.3843 and 4.3748.

KLSE – The FBM KLCI rose 0.35% to 1,555 boosted by the telecommunication & media and construction sectors. Detailed transactions showed that local institutions were net sellers with RM200.67mil position, offset by local retailers and foreign investors with RM21.3mil and RM179.3mil buying positions, respectively.

Fixed Income – The MGS benchmark for the 3-year was -11.0bps at 3.715%, 5- year -4.0bps to 4.115%, 7-year -3.0bps to 4.520%, and 10-year -2.0bps to 4.360%.

Rates – The IRS yield shifted lower as well as the (3Y) was -2.0bps at 3.785%, (5Y) -5.0bps to 4.050%, (7Y) -6.5bps to 4.230%, and (10Y) -6.0bps to 4.420%.

Against major currencies – The ringgit had the upper hand against the AUD, JPY, CNY and THB but dipped against the EUR, GBP, SGD, IDR, PHP and VND.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3700 and 4.390 while our resistance is pinned at 4.4000 and 4.4200

Source: AmInvest Research - 11 May 2022