• FOMC meeting minutes indicates possible 50bps hike in next couple of meetings

Global Highlights

Dollar Index – The greenback rebounded 0.20% to 102.05 following the release of the US Fed’s most recent minutes of its meeting. All the policymakers supported a half percentage point hike to rein in the red-hot inflation while indicating a similar move for the next couple of meeting. They also noted in the meeting that the policy rate needs to be in a “restrictive” stance in order for inflation to come down to their target. On the data front, new orders for US manufactured durable goods rose 0.4% m/m to US$265.3 billion in April 2022, following a 0.6% rise in March and below forecasts of 0.6%. The reading, a proxy for the future of US manufacturing output, may indicate that business spending has moderated.

US equities & sovereign bonds – The Wall Street closed higher as the Dow Jones rose 0.60% to 32,120, S&P 500 climbed 0.95% to 3,979 while the Nasdaq surged 1.51% to 11,435. The benchmark UST10Y was relatively unchanged at 2.745%, while the UST2Y added 1.3bps to 2.491%, making the differential yields between the two at 25.3bps.

Euro – The euro fell 0.51% to 1.068. More ECB policymakers are backing president Christine Lagarde’s plan that the central bank’s interest rate will remain at zero or above by end-September, including Dutch Central Bank officer Klaas Knot, Finland’s Olli Rehn and ECB economist Philip Lane.

British pound – The pound added 0.34% to 1.257 despite the stronger dollar.

Japanese yen – The yen weakened 0.39% to 127.32. BoJ governor Haruhiko Kuroda said that the recent rise in inflation is short-lived, and the country’s economy is still fragile, thus emphasizing the need for the BoJ’s ultra-loose monetary policy.

Chinese yuan – The yuan weakened sharply by 0.59% to 6.693, snapping its four days of winning streak. On the pandemic front, the Chinese mainland recorded 117 new Covid-19 cases of which 102 are linked to local transmission, the lowest level so far.

Korean won – The won strengthened 0.11% to 1,264.62 ahead of its central bank meeting that will be held today (26 May). We, together with the market, are expecting the Bank of Korea to raise its interest rate by 25bps to 1.75%.

Australian dollar – The Aussie dollar fell 0.21% to 0.709. Total construction work done in Australia unexpectedly dropped by 0.9% q/q during 1Q22, missing expectations of a 1.0% gain and following a revised 0.6% rise in the previous quarter 2021. This reading may take a further hit this quarter amidst a rising interest rate environment.

Commodities Highlights

Crude oil – Brent edged higher by 0.41% to US$114 per barrel while WTI added 0.51% to US$110 per barrel. US crude oil inventories shrank by 1.02mil barrels in the week ended 20 May, a much larger drop than the market expectation of a 0.74mil barrel decrease.

Gold – Gold fell 0.70% to US$1,853/oz.

Malaysia Highlights

Malaysian ringgit – The local currency ringgit strengthened slightly by 0.03% to 4.395 and traded within a range of 4.3955 and 4.3865.

KLSE – The FBM KLCI rose 0.28% to 1,536, boosted by plantation and financial services. Detailed transactions showed that both local institutions and retailers were net sellers with RM1.8mil and RM0.26mil, respectively, while being offset by foreign investors buying flow of RM2.1mil.

Fixed income – The MGS benchmark yields went down with 3-year -1.0bps to 3.475%, 5-year -1.0bps to 3.740%, 7-year -7.5bps to 4.000% while the 10-year -8.5bps to 4.145%.

Rates – The IRS yields went down with the (3Y) falling 7.0bps to 3.540%, (5Y) - 7.5bps to 3.720%, (7Y) -5.5bps to 3.910% and (10Y) -8.5bps to 4.055%.

Against major currencies – The ringgit was firmer against the EUR, JPY, CNY, SGD, THB, PHP and VND but depreciated against the IDR, GBP and AUD.

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 - 26 May 2022