• Dollar hits 104-level on the back of safe-haven allure

• MYR to fluctuate between 4.3900 and 4.4200 against USD

Global Highlights

Dollar Index – The greenback hit a new 20-year high, rising 0.97% on daily changes to 104.85 due to its safe-haven lure amidst market’s worries that central banks’ policy path could pose major challenges for global growth. The worries intensified following the release of US inflation data that came in higher than expected despite the pullback. On the data front, producer prices in the US rose 0.5% m/m (cons.: 0.5%), much slower compared to the previous month of 1.6% m/m. On a yearly basis, it climbed 11%, higher than what the market expects (cons. 10.7%). Meanwhile, the weekly labour market indicator showed that the number of new claims for unemployment benefit increased to 203K last week, the highest reading since Feb’22.

US equities and sovereign bonds – Overnight, Wall Street was mixed when the Dow Jones fell 0.33% to 31,730 and the S&P 500 declined 0.13% to 3,930. However, the tech heavyweight Nasdaq gained 0.06% to 11,371. The benchmark UST10Y fell 7.3bps to 2.848%, making the UST10/2 yield spread to hover around 29bps when the UST2 was at 2.559%.

Euro – Despite the recent tone shift by the European Central Bank (ECB), the sentiment surrounding the euro remained grim. It tumbled 1.27% to 1.038, touching a new 5-year low. ECB official Gabriel Makhlouf called for the Governing Council to start acting on inflation, further adding a hawkish note on behalf of the ECB.

British pound – The pound shed 0.40% to 1.220. The British economy grew 8.7% y/y during the first quarter of 2022, which is higher than the 6.6% in 4Q21, but still below the market forecast of 9.0%. Growth was driven by the services sector (9.9%), production (2.0%) and construction (7.4%).

Japanese yen – The yen strengthened 1.25% to 128.34, the fastest gain made this week. According to BoJ officials’ summary of opinions at the April meeting, it is unsuitable to change the monetary policy for the sole purpose of controlling the exchange rate amidst weak recovery.

Chinese yuan – The yuan weakened 0.96% to 6.786 following the People’s Bank of China’s (PBoC) statement that it will put stabilising domestic economic growth a “top priority” and further enhance support for shaky sectors. This is a sign that the central bank is ready to use more easing tools amidst a rising interest rate environment.

Korean won – The won depreciated 1.09% to 1,289. On the political front, South Korea elected a new president Yoon Suk-yeol who is expected to face tough challenges such as the US-China relation dynamic, North Korean threat and growing income inequality domestically.

Australian dollar – The Aussie dollar nose-dived 1.18% to 0.686, the lowest level since June 2020. The final figure of seasonally adjusted building permits contracted 18.5% m/m in Mar 2022 after a 42% growth in the prior month.

Commodities Highlights

Crude oil – The oil market was mixed when the Brent edged 0.06% lower to US$107 per barrel while WTI inched higher by 0.40% to US$106 per barrel amidst thin trading. The possibilities of the EU banning oil from Russia could push prices higher but downside factors such slowing China economic growth and an aggressive US Fed in its policy path outweigh the rise in oil prices.

Gold – The gold price tumbled 1.65% to US$1,821/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit dipped 0.39% to 4.394, which is the weakest level it reached in Mar’2020. The local currency was traded within the range of 4.394 and 4.3752. Based on data, distributive trade increased 10.8% y/y in Mar’22, faster than the 10.2% gain in the previous month. It marked the sixth straight month of increase in retail sales amid the lifting of Covid-19 restrictions.

KLSE – The FBM KLCI lost 1.10% to 1,539 amidst weaker major and regional indices as investors became less risky. Detailed transactions showed that both local retailers and institutions were net buyers with RM103.8mil and RM41.4mil, respectively, while being offset by foreign investors selling flow of RM145.2mil.

Fixed Income – The benchmark MGS yields steepened as the 3-year -12.0bps to 3.710%, 5-year -6.5bps to 4.060%, 7-year -3.0bps to 4.490%, but the 10-year +7.0bps to 4.450%.

Rates – The IRS yield curve fell across the board: the (3Y) was -15.0bps to 3.655%, (5Y) -17.5bps to 3.920%, (7Y) -17.5bps to 4.090% and (10Y) -20.0bps to 4.270%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3700 and 4.3900 while our resistance is pinned at 4.4000 and 4.4200

Source: AmInvest Research - 13 May 2022