• Bank of Korea expected to deliver 25bps rate hike

Global Highlights

Dollar Index – The dollar rose marginally by 0.05% to 108.68 recouping some losses it made in the previous session. New orders for US-manufactured durable goods surprisingly remained flat from a month earlier, defying market forecasts of a 0.6% m/m increase and following a 2.2% m/m June increase. Due to a 0.7% fall in orders for transport equipment, it was the first month in five that orders showed no rise.

US equities & sovereign bonds – Wall Street gained some ground as the Dow Jones rose 0.18% to 32,969, the S&P 500 climbed 0.29% to 4,141, while the Nasdaq edged up 0.41% to 12,432. The UST10Y yield benchmark added 5.8bps to 3.104% while the UST2Y was 9.1bps higher at 3.391%, widening the inverted differentials between the two to 28.6bps.

Euro – The euro dipped slightly by 0.03% to 0.997, remaining below parity for the third day straight. Since the imposition of sanctions against Russia, the EU has continued to struggle to balance its energy demand. Gazprom issued a restriction on the amount of natural gas that may be shipped to Europe every day, cutting the pipeline's capacity for shipments by 20%. As a result, Europe is experiencing the biggest increase in electricity prices.

British pound – The pound fell 0.31% to 1.180. Britain's 10-year gilt yield has risen above 2.6%, approaching its highest level since 2014, on expectations that the BoE will have no choice but to continue its aggressive tightening and deliver back-to-back 50bps hikes in borrowing costs to control inflation, despite the fact that the British economy is heading towards recession. On a side note, the BoE is now expecting the economy to go into recession starting from 4Q22, lasting for about 4 quarters.

Japanese yen – The yen weakened 0.26% to 137.12. On the pandemic front, amidst surging Covid-19 cases in the country, the government will remove the pre-departure Covid-19 tests requirement for incoming vaccinated travellers, in a move to bring Japan’s border measure in line with other developed countries.

Chinese yuan – The yuan depreciated 0.36% to 6.860, the weakest level since 2020. China has prepared a 19-point policy package to help maintain economic operations within an acceptable range in an effort to stabilise economic growth. The package contains a quota of more than 300 billion yuan (US$43.7 billion) in financial tools for policy and development that are expected to work in tandem with previously implemented measures.

Korean won – The won strengthened 0.24% to 1,342. Slower than a revised 10.0% increase in June, the Producer Price Index (PPI) rose 9.2% y/y in July. It was both the slowest rate since March and the first slowdown since February. The BoK is set to announce its key interest rate decision later today where it is expected to push the rate to 2.50%, a 25bps increase which is slower than the previous 50bps hike.

Australian dollar – The Australian dollar lost 0.32% to 0.691. After a decline following the pandemic, economists forecast that Australian home prices will increase again in 2024. Due to limited borrowing capacity and rising interest rates, house values are still predicted to drop 16% nationally over the next 18 months before recovering after that.

Commodities Highlights

Crude oil – WTI crude gained 1.23% to US$94 per barrel, while Brent crude futures gained 1.00% to US$101 per barrel after a volatile trading session due to worries that the US will not entertain additional concessions to Iran in response to a draft agreement that would reinstate Tehran's nuclear deal and possibly OPEC member's oil shipments.

Gold – The price of gold rose 0.17% to US$1,751/oz, moving further away from a near 4-week low reached earlier this week.

Malaysia Highlights

Malaysian ringgit – The ringgit was firmer by a marginal 0.06% to 4.486 and traded within the range of 4.488 and 4.484. In order to create an annual budget that meets the needs of the rakyat that is consistent with the nation's socioeconomic development policy, The MoF is inviting members of the public to provide their feedback on the Budget 2023 Public Consultation Paper (PCP) "Improving the Government's Green Procurement Policy" before or on 12 September.

KLSE – The FBM KLCI dropped 1.03% to 1,467. Detailed transactions showed that local institutions and retailers were net buyers with RM24.3mil and RM66.2mil positions, respectively, while foreign investors were net sellers with RM90.5mil flow.

Fixed income – The MGS 3-year benchmark yield was -3.0bps to 3.360%, 5- year -1.0bps to 3.711%, and 7-year -1.0bps to 3.911% while 10-year remained unchanged at 3.990%.

Rates – The IRS yield for the (3Y) was untouched at 3.535%, (5Y) -2.0bps to 3.650%, (7Y) -4.5bps to 3.750%, and (10Y) -2.2bps to 3.930%.

Against major currencies – The ringgit was weaker against the EUR, GBP, AUD, and SGD, but stronger against the JPY, CNY, THB, IDR, and VND. Meanwhile, the ringgit was stable against the 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 - 25 Aug 2022