• Dollar retreats further from recent 20-year high

Global Highlights

Dollar index: The greenback was down 1.04% to 102.07, hitting its weakest level in more than a month as pro-cyclical currencies are set to stage a comeback in the global currency market. US Fed official Raphael Bostic said that it “might make sense” for the Fed to pause the interest rate hike in September to assess the impact on inflation and the economy, an early hint of what the policy path would look like over the next few quarters.

US equities & sovereign bonds – Wall Street closed sharply higher as the risk sentiment slightly improved. The Dow Jones surged 1.98% to 31,880, S&P 500 climbed 1.86% to 3,974, while the Nasdaq rose 1.59% to 11,535. The UST10Y added 7.0bps to 2.851% while the UST2Y rose 3.9bps to 2.620%, resulting in the yield differential of 23.1bps.

Euro – The euro stretched its winning streak as it jumped 1.20% to 1.069 following ECB president Christine Lagarde’s remarks in the central bank’s blog that it will likely start raising interest rates out of the negative territory by the end of the third quarter. According to data, the Ifo Business Climate survey for Germany unexpectedly rose to a 3-month high of 93 in May 2022 from 91.9 in the previous period, above market expectations of 91.4 although businesses are still facing supply issues amidst ongoing global supply chain disruptions.

British pound – Similarly, the pound leapt 0.87% to 1.259. The Bank of England governor Andrew Bailey said that the central bank is ready to raise interest rates again in order fight the red-hot inflation as the UK is facing a big squeeze on real income caused by the higher price of imports and oil.

Japanese yen – The yen strengthened 0.02% to 127.90 as the currency benefitted from the weaker dollar. The Bank of Japan is currently under pressure as the most recent customer inflation has hit the 2.0% target.

Chinese yuan – The yuan further tilted to the upside as it added 0.65% to 6.650, retreating from the 20-month low it hit in mid-May. On another note, US President Joe Biden said he was weighing to cut tariffs on China’s imports, a development which investors applaud. Meanwhile, Shanghai reopened part of its subway system after months long Covid lockdowns, providing some impetus to the risk-on sentiment.

Korean won – The won appreciated 0.30% to 1,264.19. The Composite Consumer Sentiment (CCSI) in South Korea edged down to 102.6 in May from 103.8 in April. Sentiment deteriorated regarding current living standards amidst high inflation environments.

Australian dollar – The Aussie dollar rose 0.98% to 0.711 as investors were hopeful that the recovering situation in China could boost global growth.

Commodities Highlights

Crude oil – The oil market was mixed with Brent rising 0.77% to US$113 per barrel while WTI dropped 2.60% to US$110 per barrel.

Gold – Gold was on the upside as it climbed 0.38% to US$1,853/oz.

Malaysia Highlights

Malaysia ringgit – The local currency was relatively unchanged, closing at 4.389. Throughout the session, it was traded within the range of 4.3815 and 4.393.

KLSE – The FBM KLCI fell 0.43% to 1,543 amidst a recovering risk sentiment. Detailed transactions showed that local retailers were net buyers with RM47.1mil while being offset by local institutions’ (RM11.1mil) and foreign investors’ (RM36.1mil) net selling flow.

Rates – The IRS yields were mixed with the (3Y) -6.0bps to 3.555%, (5Y) +0.5bps to 3.720%, (7Y) -0.5bps to 3.915% and (10Y) +0.5bps to 4.080%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.3800 and 4.3850 while our resistance is pinned at 4.4150 and 4.4350

Source: AmInvest Research - 24 May 2022