• Dollar pulls back as safe haven currencies treading higher

• Economic highlights: The Bank of England made another 25bps rate hike.

Global Highlights

Dollar Index – The dollar further retreated away from recent tumbled 1.45% to 103.63 while safe haven currencies such as Swiss franc and yen outperformed. The franc benefitted from its central bank’s surprising move by raising its interest by 50bps to -0.25% after keeping the interest rate at record low for 15 years. To note, franc strengthened 2.78% to 0.966.

US equities & sovereign bonds – After slight rebound, Wall Street fell sharply as recession-induced worry is looming in the risky assets market. The Dow Jones sank 2.42% to 29,927, the S&P500 tumbled 3.25% to 3,667, while the Nasdaq dropped 4.08% to 10,646. The UST 10-year benchmark yield fell 8.9bps to 3.195% while the UST2-year lost 9.7bps to 3.093%, making the yield differential to widened to 10.2bps.

Euro – The euro went up 1.01% to 1.055. On the data front, wages and salaries growth in the euro area went up to 2.7% y/y during the first quarter of 2022, up from 1.5% y/y in the previous quarter. But it is still lower than the labour cost growth of 3.2% y/y during the same period.

British pound – The British pound was on the upside for the second consecutive day as it rose 1.41% to 1.235 after Bank of England (BoE) raised its interest rate by 25bps to 1.25%, in line with market expectations, and at level we have not seen since late 2009.

Japanese yen – The yen strengthened 1.22% to 132.21 for the second consecutive days. Japan’s trade deficit widened to 2.38 trillion yen in May 2022, higher than 842 billion yen in April and marking the 10th straight month of trade deficit. Amidst surging commodity prices and weaker yen, imports of mineral fuels surged 147.8% y/y.

Chinese yuan – The yuan appreciated 0.16% to 6.704. The average of new home prices in China's major cities contracted 0.1% y/y in May 2022, reversing from a 0.7% y/y growth in April. It is the first contraction in new home prices since 2015. Also,

Korean won – The won posted stronger position as it appreciated 0.27% to 1,286.90. South Korea will extend its onshore foreign exchange trading hours to 2am local to attract more foreign investors. It is a part of a bigger plan to let onshore market to trade around the clock, but the detailed plan has not been unveiled yet. This is amidst heightened volatility in Korean won as it is near 13- year low against the USD.

Australian dollar – The Aussie dollar went up 0.63% to trade around 0.705 following the release of Australia’s labour data. Report showed that unemployment rate was flat at 3.9% in May 2022, its lowest on record for the third consecutive months.

Commodities Highlights

Crude oil – Supply concerns in global oil market re-emerged as the US unveiled sanctions on Iranian petrochemical producers amidst collapsing Iran nuclear deal. Brent rose 1.10% to US$119 per barrel while WTI climbed 1.98% to US$117 per barrel.

Gold – The gold price treaded upwards by 1.28% to US$1,857/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit appreciated slightly by 0.23% to 4.403 and traded within the range of 4.4123 and 4.3973. The Prime Minister Datuk Seri Ismail Sabri Yaakob announced that all public services under RapidKL will be free of charge for one month starting immediately. Costing as much as much as RM155 million in subsidies, this may help rakyat in facing rising living costs.

KLSE – The local bourse’s FBM KLCI gained 0.94% to 1,473. Gainers were seen in financial services and telecommunications & media sectors. Detailed transactions showed that foreign investors remained the net sellers with RM100.4mil position while being offset by the net buying from local institutions (RM69.2mil) and retailers (RM31.2mil).

Rates – The IRS yield for (3Y) was -1.5bps to 3.805%, (5Y) -1.0bps to 4.015%, (7Y) +0.2bps to 4.170%, and (10Y) was flat at 4.255%.

Against major currencies – The ringgit was stronger against EUR, GBP, CNY, SGD, THB, IDR, PHP and VND but down against JPY 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 4.4100 and 4.4200.

Source: AmInvest Research - 17 Jun 2022