• More central banks are becoming hawkish after Fed’s 75bps rate hike.

Global Highlights

Dollar Index – The dollar gained 1.03% to 104.700. The US Treasury Secretary Janet Yellen says she expects the economy to slow after the Fed’s aggressive rate hike to cool down inflation but continued insisting that a full-blown recession is not at all inevitable.

US equities & sovereign bonds – Wall Street was mixed where Dow Jones fell 0.13% to 29,889, S&P 500 gained 0.22% to 3,675, and Nasdaq jumped 1.43% to 10,798. The differential between MGS10y and UST10y is 134.59bps, USDT10y and UST2y is 4.71bps. Where, the UST0y was at 3.226% and the UST2y was t 3.179%

Euro – The euro lost 0.47% to 1.050. The European Central Bank’s (ECB) Governing Council member Olli Rehn said that the central bank will ensure that its monetary policy is transmitted equally across all member states to avoid volatility in government bond markets. This was the response to the market’s pricing in for the interest rates to be adjusted in June’22.

British pound – The pound weakened by 0.90% to 1.224. Based on the recent statement by the Bank of England, inflation in the UK will probably peak in the second half of this year. The central bank has also signalled that a larger move could be done if needed to bring inflation under control.

Japanese yen – The yen lost by 2.13% to 135.020. Despite weakening yen and potential accelerating prices, Prime Minister Fumio Kishida said the Bank of Japan should maintain its monetary policy stance for now to support the economy.

Chinese yuan – The yuan lost 0.18% to 6.717. The Chinese authorities is not backing away from the zero-Covid stance, as several cities are still under tight lockdown. A US ambassador to China has warned that the policy is likely to last beyond this year and affecting foreign investment.

Korean won – The won depreciated 0.08% to 1,287.98. The Korean government announced another package of emergency measures, including additional fuel tax cuts and higher income tax deduction rates for public transit use, in response to the current inflationary pressure. Currently, the inflation rate in South Korea is 5.4% y/y in May’22.

Australian dollar – The Aussie dollar sank by 1.63% to 0.693. The labour market in Australia improved furthers as the unemployment held at a 48-year low. Consensus now are expecting that the Reserve Bank of Australia will make another 50bps increase in the next meeting in July.

Commodities Highlights

Crude oil – Oil prices fell where Brent lost 5.58% to US$113.12 per barrel and WTI dropped 6.83% to US$109.56 per barrel.

Gold – The gold price declined 0.97% to US$1,839/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit gained 0.03% to 4.402. Finance Minister Tengku Zafrul maintains Malaysia’s economic growth projection of between 5.3% and 6.3% this year, responding to uncertainty in the global economy especially coming from the US.

KLSE – The FBM KLCI down by 1.09% to 1,457. Detailed transactions showed that local institutions and local retailers were net buyer of RM58.3 mil and RM52.7 mil respectively. Foreign investors were net seller of RM111.0 mil.

Fixed income – The MGS for 3-year was up 1.5bps to 3.590%, 5-year up 1.0bps to 3.920%, 7-year down 2.0bps to 4.330%, and 10-year down 1.0bps to 4.360%.

Rates – The IRS yield for (3Y) was -1.5bps to 3.790%, (5Y) -2.50bps to 3.990%, (7Y) -4.00bps to 4.130%, and (10Y) -0.5bps to at 4.250%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.4000 and 4.4150 while our resistance is pinned at 4.4200 and 4.4300.

Source: AmInvest Research - 20 Jun 2022