• USD falls for first time this week. All eyes on Jackson Hole symposium.

Global Highlights

Dollar Index – The dollar fell for the first time this week by 0.19% to 108.47, as US second quarter growth showed disappointment. The economy declined by 0.6% annualised rate, based on the second estimate, which is lower than the previously estimated 0.9% pace of decline. The Jackson Hole symposium will be held this weekend and more clarity on the path of the fed funds rate will be given by the Fed. Most FOMC members are on the same view that more hikes are needed to push inflation lower than the current level.

US equities & sovereign bonds – Wall Street gained due to the weaker dollar, where Dow Jones was up 0.98% to 33,292, S&P 500 gained 1.41% to 4,199 and the tech heavyweight Nasdaq rose 1.67% to 12,639. The UST10Y benchmark yield was at 3.026%, while the UST2Y was at 3.366%, bringing the differential between them to -34.03bps.

Euro – The euro gained 0.08% to 0.998, still below parity with the dollar. Economic pessimism continues in Europe due to the high inflation and potentially higher interest rates, where business confidence outlook in Germany for the next six months inched down from 80.4 in July to 80.3 in Aug.

British pound – The pound gained 0.28% to 1.183 due to the weaker dollar. Major sectors in the UK such as construction stalled due to higher input costs and uncertainties regarding government policies as the UK is still waiting for a new prime minister to be chosen.

Japanese yen – The yen also gained by 0.46% to 136.490 due to the weaker dollar. The Japanese government has flagged several risks that could affect the economy toward 2023, including faster monetary policy tightening from major central banks that could weaken the yen, rising inflation and slower wage growth for households.

Chinese yuan – The yuan climbed 0.15% to 6.849. The outlook on the Chinese economy remains on the downside, dragged by the zero-Covid policy and poor prospect in the real estate market. The Chinese government is providing another economic stimulus worth CNY1 trillion to address these issues.

Korean won – The won gained by 0.52% to 1,335.42 due to the weaker dollar and the Bank of Korea pushing up the interest rates by 25bps earlier. This brings the interest rates to 2.50%, in a step to fight inflation that is currently at 6.3%. More hikes will be made if price pressure is not cooling.

Australian dollar – The Aussie dollar added 1.04% to 0.698. Large mining companies and airlines anticipate stronger earnings on firmer commodity prices and a recovery from Covid-19, while supermarkets, banks, and manufacturers are affected by inflation and stagnating wages.

Commodities Highlights

Crude oil – Oil prices declined, reflecting pessimism in the global outlook. Brent slid 1.86% to US$99.34 per barrel, and WTI was down 2.50% to US$92.52/barrel. But oil prices currently are higher relative to last week’s levels, as OPEC+ could cut supply if the Iran nuclear deal is pass through.

Gold – Gold gained 0.43% to US$1,759/oz, in line with the weaker dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit gained 0.31% to 4.472 due to the weaker dollar and stronger yuan. The outlook on Malaysia’s economy looks bright as Malaysia’s leading index increased by 5.4% y/y in June from 2.3% y/y in May. The increase is due to several improving indicators including trade, housing units’ approval and new companies registered.

KLSE – The FBM KLCI gained 1.92% to 1,495. Detailed transactions showed that local institutions and local retails were net seller of RM114.3mil and RM78.7 respectively. Foreign investors were net buyers of RM193mil.

Fixed income – The MGS 3Y remained at 3.360%, 5Y remained down 1bps to 3.700%, 7Y down 3.0bps to 3.885%, and 10Y down 2.0bps 3.970%.

Rates – The IRS yield for the (3Y) was down 2.00bps to 3.515%, (5Y) -5.50bps to 3.595%, (7Y) -4.00bps to 3.710%, and (10Y) -5.50bps to 3.875%

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

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 - 26 Aug 2022