• Dollar and euro at parity for the first time in 20 years

Global Highlights

Dollar Index – The dollar gained 0.05% to 108.072 as the markets are bracing for July’s inflation numbers that will be published later today. Consensus now is expecting inflation to be around 8.8%, higher than June’s figure of 8.6%.

US equities & sovereign bonds – Wall Street is in the red with Dow Jones falling 0.62% to 30,981, S&P 500 dropping 0.92% to 3,819 and the tech heavyweight Nasdaq down 0.95% to 11,265. The UST10Y/UST2Y spread is still in the negative territory of 8.04bps, where the UST10Y was at 2.969%, and the UST2Y was at 3.049%.

Euro – The euro weakened 0.03% to 1.004 as the exchange rate between the euro and the US dollar is at parity for the first time in 20 years. The European Union has so far frozen US$13.8 billion worth of assets held by Russian oligarchs, other individuals and entities sanctioned over Moscow's war against Ukraine.

British pound – The pound dipped 0.03% to 1.189. Consumers are evidently limiting spending due to soaring inflation with retail sales in June being 1% lower than the previous.

Japanese yen – The yen gained 0.41% to 136.870, as the BoJ governor warned that the global and Japanese economy are heading toward a highly uncertain outlook and will keep the monetary policy loose.

Chinese yuan – The yuan edged up 0.09% to 6.725. Worries of a financial problem intensified as depositors of four rural banks in Henan and one in Anhui have not been able to withdraw their funds since April. The banks allegedly were offering higher interest rates than the BoC.

Korean won – The won depreciated 0.65% to 1,312.44. The Korea Chamber of Commerce and Industry warns that the expected hike in interest rates could lead to companies spending an additional 3.9 trillion won on interest payments, especially in the BBIG sectors (battery, biotech, internet and gaming) that have borrowed significant amounts to continue investments.

Australian dollar – The Aussie dollar was up by 0.36% to 0.676. The Westpac Melbourne Institute Index of Consumer Sentiment fell by 3.0% in July as high cost of living and rising interest rates worsened the national outlook. The index has been on a downward trend since July last year.

Commodities Highlights

Crude oil – Oil prices tumbled where Brent shed 7.11% to US$99.49 per barrel and WTI dropped 7.93% to US$95.84 per barrel. The downward trend on oil prices and other commodities is reflecting the pessimism on the US economy, and further lockdowns in China that are dampening demand.

Gold – The gold price declined 0.46% to US$1,726/oz reflecting global pessimism as investors flee to the safe-haven US dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit was on the downside again as it lost 0.34% to 4.440, due to the strengthening dollar and weakening yuan. The Malaysian government is not planning another economic shutdown despite the increasing number of Covid-19 cases.

KLSE – The FBM KLCI added 0.02% to 1,426. Detailed transactions showed that local institutions were net sellers of RM60.4 mil. Local retailers and foreign investors were net buyers of RM38.5mil and RM21.9mil respectively.

Rates – The IRS yield for (3Y) was -12.5bps to 3.375%, (5Y) -14.5bps to 3.530%, (7Y) -16.0bps to 3.620%, and (10Y) -17.5bps to at 3.720%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.4500 and 4.500 while our resistance is pinned at 4.550 and 4.600.

Source: AmInvest Research - 13 Jul 2022