• Dollar Index eases after labour market signals mixed condition

Global Highlights

Dollar Index – The greenback fell 0.14% to 109.53, easing from the 20-year high it hit last week and following the release of labour market data which painted a mixed picture. Reports showed that the US economy added 315K jobs in August 2022, much lower than the 526K in the previous month but stronger than market expectations of 300K. Also, the unemployment rate spiked to a 6-month high of 3.7% while the wages rose 0.3% m/m, less than the 0.4% m/m expected. At the same time, new orders for US manufactured goods fell 1% m/m, the first contraction since the pandemic started. These can be deemed as an initial sign of a slowing economy.

US equities & sovereign bonds – Wall Street closed in the red across the board as the Dow Jones fell 1.07% to 31,318, S&P 500 dropped 1.07% to 3,924 while the tech heavyweight Nasdaq tumbled 1.31% to 11,631. The UST10Y benchmark yield lost 6.4bps to 3.189% while the UST2Y lost 11.2bps to 3.387%, narrowing the differential between the two to 19.8bps.

Euro – The euro rose slightly 0.08% to 0.995 as market players mull over growth worries and the possibilities of a big rate hike by the ECB this week following the new record high of the Euro area’s inflation rate. Defying expectations that the Nord Stream would resume its gas supply to Europe on Saturday, Gazprom extended the shutdown and provided no specific timeframe for a reopening, worsening Europe’s gas situation.

British pound – The pound dropped 0.31% to 1.151, a level we have not seen since March 2020 as soaring inflation overwhelmed the UK’s growth prospect alongside political uncertainty over the election of a new PM.

Japanese yen – The yen strengthened marginally 0.01% to 140.20, past the psychological level of 140 for the first time in 24 years due to stark differences between the BoJ and the US Fed’s policy stance post-Jackson Hole symposium. This has fuelled further the bets on the BoJ’s intervention in the FX market.

Chinese yuan – The yuan strengthened 0.10% to 6.900, hovering near its lowest in two years, induced by renewed Covid restrictions in key cities including Chengdu and a record heatwave which caused power shortages in certain areas.

Korean won – The won fell by 0.63% to 1,363 despite the easing inflation rate seen for the month of August 2022. Data suggested that price growth hit 5.7% y/y, the lowest in three months as energy and food prices declined. This will put less pressure on the BoK to deliver another large rate hike in the upcoming meeting.

Australian dollar – The Australian dollar rose 0.35% to 0.681 To address the labour shortage and the country’s dependence on lower-paid temporary workers, Australia has raised its permanent immigration intake to 200,000. The labour tightness in the country has caused difficulty for business to secure workers. The new immigration intake will focus on nursing, engineering, and technology roles as well as the rural workforce.

Commodities Highlights

Crude oil – Brent rose 0.71% to US$93 per barrel while WTI climbed 0.30% to US$86 per barrel ahead of the OPEC+ meeting today following Saudi’s warning of production cuts amidst weaker demand from China due to renewed restrictions and slowing global economic growth.

Gold – The price of gold rose 0.86% to US$1,712/oz, rebounding from five consecutive sessions of decline following investors cutting back the Fed funds rate hike bets due to mixed US employment data.

Malaysia Highlights

Malaysian ringgit – The ringgit edged down again by 0.07% to 4.486 and traded within the narrow range of 4.488 and 4.483. In the upcoming BNM meeting on Thursday, we expect the central bank to deliver another 25bps rate hike to bring the OPR to 2.50% as we view that the demand-pull inflation notion is starting to pick up as shown by an improving labour market.

KLSE – The FBM KLCI eased slightly by 0.05% to 1,491. Detailed transactions showed that the local institutions and foreign investors were the net buyers with RM6.32mil and RM0.39mil position, respectively, while the local retailers were the net sellers with RM6.71mil flow.

Fixed income – The local bond market was quieter as traders stayed on the sidelines ahead of the BNM meeting. The 3-year was +1.0bps to 3.340%, 5- year +1.0bps to 3.760%, 7-year +1.0bps to 3.940%, and 10-year remained at 4.010%.

Rates – The IRS yield for the (3Y) was +4.0 bps to 3.625%, (5Y) +4.3bps to 3.840%, (7Y) +0.6bps to 3.840%, and (10Y) +4.0bps to 4.020%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.455 and 4.460 while our resistance is pinned at 4.500 and 4.550.

Source: AmInvest Research - 5 Sept 2022