• US dollar continues its rally.

Global Highlights

Dollar Index – The dollar continued rallying this week, gaining by 0.81% to 109.046, due to concerns on a global economic slowdown toward the end of the year. More clarity will be provided on the path of the federal funds rate as the Jackson Hole symposium will be held this weekend.

US equities & sovereign bonds – Wall Street was in the red, where Dow Jones was down 1.91% to 33,064, S&P 500 slipped 2.14% to 4,138 and the tech heavyweight Nasdaq fell 2.55% to 12,382. The UST10Y benchmark yield was at 3.015%, while the UST2Y was at 3.310%, bringing the differential between them to -29.52bps.

Euro – The euro lost 0.94% to 0.994, as it hit parity with the dollar. The S&P PMI numbers for August will be published later today where manufacturing activity is expected to remain contractionary due to raw materials shortages and supply chain disruptions. Activity in the services sector however is expected to moderate but will remain above the expansion level.

British pound – The pound remained in a downward trend, dipping 0.52% to 1.177 due to pessimism in the economic outlook for the remainder of the year. According to the ONS, the UK economy shrank 11% during the Covid-19 pandemic in 2020, making it the worst decline in the history of the country.

Japanese yen – The yen also continued its downtrend, shedding 0.37% to 137.480 due to the stronger dollar. The Bank of Japan consistently reaffirmed its commitment to maintaining ultra-low interest rates.

Chinese yuan – The yuan lost 0.45% to 6.848 due to the bleak outlook on China’s economy. The loss was also in response to the 5bps cut in the one-year loan prime rate to 3.65%, while the five-year LPR was reduced by 15bps to 4.3%. China's economy continues to be under pressure from the country's zero-Covid strategy, problems in the real estate industry, and power shortages in manufacturing areas in addition to growing policy divergence, thus increasing the possibility of additional capital outflows and yuan depreciation.

Korean won – The won weakened for the second day by 1.05% to 1,339.80. The Composite Consumer Sentiment Index in South Korea rose 2.6 points from the previous month to 88.8 in August, which was the second-lowest reading in the preceding two years. Living standards and the economy's outlook both experienced increases in future confidence, while consumer spending expectations declined.

Australian dollar – The Aussie dollar gained 0.03% to 0.688, after dropping yesterday. The market is split on the degree of the Reserve Bank of Australia's rate increases that is likely to occur in the upcoming months due to a mixed employment report. Markets had anticipated that the RBA will raise its policy rate by another half-point in September, but softer data caused them to be revised downward.

Commodities Highlights

Crude oil – Oil prices declined, reflecting pessimism in the global outlook. Brent slid 0.25% to US$96.48 per barrel, and WTI was down 0.59% to US$90.23/barrel. Saudi Arabia has cautioned that OPEC+ might reduce supply against the prospect of a nuclear agreement that could allow Iran's oil to return to the market after being sanctioned.

Gold – Gold lost 0.62% to US$1,736/oz, in line with the stronger dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit dipped 0.19% to 4.486 due to the stronger dollar and weaker yuan. The prime minister is looking to revive the KL Singapore high-speed train that was initially worth at RM110bil. He also is looking for the possibility of extending the railway network to the northern part of Malaysia to Thailand.

KLSE – The FBM KLCI fell 1.13% to 1,487. Detailed transactions showed that local institutions were net seller of RM92.4mil. Local retailers and foreign investors were net buyers of RM32.6mil and RM56.2mil respectively.

Fixed income – The MGS 3Y up 4.0bps to 3.400%, 5Y remained at 3.718%, 7Y up 2.0bps to 3.912%, and 10Y remained at 3.970%.

Rates – The IRS yield for the (3Y) was up 1.00bps to 3.500%, (5Y) +1.00bps to 3.635%, (7Y) up +2.80bps to 3.765%, and (10Y) remained 3.910%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.475 and 4.485 while our resistance is pinned at 4.570 and 4.630.

Source: AmInvest Research - 23 Aug 2022