• Cyclical currencies outperform amidst 4th of July holiday in US

Global Highlights

Dollar Index – Amidst the US Independence Day holiday, the Dollar Index remained unchanged at 105.14.

US equities & sovereign bonds – Wall Street was closed. The Dow Jones was at 31,097, S&P 500 at 3,825 while Nasdaq at 11,128. The UST10Y yield was at 2.880%.

Euro – The euro rose marginally by 0.08% to 1.042. The annual rate of PPI grew slower at 36.3% y/y in May, compared to 37.2% in the previous month. Nonetheless, the reading still remained at a record-breaking high. Other than that, Germany’s trade surplus shrank significantly to €0.5 billion in May 2022, the lowest level since 1992, as exports climbed by only 19% y/y while imports soared 33.6% y/y due to rising energy prices.

British pound – The pound rose 0.19% to 1.212 as Britain plans to introduce economic, trade and transport sanctions on Belarus, including import and export bans on goods estimated around US$73 million, due to its support for Russia's invasion of Ukraine.

Japanese yen – The yen depreciated by 0.30% to 135.62. Japan’s government has raised its estimates of national tax revenue from the last fiscal year ending in March, boosted by a weaker yen and recovery from the pandemic which helped increased big firms’ profit.

Chinese yuan – The yuan appreciated slightly by 0.01% to 6.701. China's Silk Road Fund (SRF) will invest 20 billion yuan in Indonesia's sovereign wealth fund to establish economic connectivity between both countries. Also, more than 1.7 million people were placed under a new lockdown in the central Anhui province after more than 300 new cases were detected.

Korean won – The won gained 0.03% to 1,297. The finance minister and governor of BoK have agreed to work closely to deal with rising “complex” risks to the economy, which they expect to last for a considerable amount of time. On another note, the rating agency S&P forecasted annual inflation to hit 5% this year while the GDP is expected to grow at 2.6%.

Australian dollar – The Aussie dollar jumped 0.75% to 0.687. Melbourne Institute’s monthly inflation gauge spiked by 0.3% in June, after rising 1.1% in May. Also, building permits approved grew 9.9% m/m, surprisingly higher than the market forecast of 1.8% fall. On year-on-year basis, the reading fell 20.9%

Commodities Highlights

Crude oil – Oil prices rose due to the supply concerns amid Libya’s political unrest, lower OPEC output and Russia’s sanctions. However, the gains were limited by recession woes. Brent price added 1.68% to US$113 per barrel while WTI was untouched at US$108 per barrel

Gold – The gold price rose 0.28% to US$1,816/oz. Despite the rise, gold remained under pressure from a stronger dollar and rising interest rates environment.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened 0.13% to 4.143. A report by the DOSM showed that rising export prices had boosted Malaysia's terms of trade in May 2022 by 1.0% m/m but the export volume index fell by 9.1%.

KLSE – The FBM KLCI dropped 0.84% to 1,438, dragged by the technology, energy and property sectors. Detailed transactions showed that foreign investors were net sellers with RM79.4mil while local institutions and retailers were net buyers with RM50.2mil and RM29.2mil respectively.

Fixed income – Most benchmark yields in the local bond market remained flat with the 3-year at 3.515%, 5-year at 3.974%, and 10-year at 4.150%, while the 7-year was -2.0bps to 4.130%.

Rates – The IRS yield for (3Y) was -2.0bps to 3.605%, (5Y) -3.5bps to 3.755%, (7Y) -0.5bps to 3.915%, and (10Y) -4.5bps to at 3.980%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.4000 and 4.4100 while our resistance is pinned at 4.4150 and 4.4200.

Source: AmInvest Research - 5 Jul 2022