• Dollar weakens. ECB and BNM to meet today

Global Highlights

Dollar Index – The dollar depreciated 0.34% to 109.840, the first decline in the week in response to the Fed’s Beige Book which said that the US economy is likely to weaken ahead as price pressure remains due to global supply chain disruptions and a tight labour market.

US equities & sovereign bonds – Wall Street closed higher. Dow Jones gained 1.40% to 31,581, S&P 500 up 1.84% to 3,980 and the tech heavyweight Nasdaq rose 2.14% to 11,792. The UST10Y benchmark yield was at 3.264%, while the UST2Y was at 3.431%, bringing the differential between them to -16.74bps.

Euro – The euro edged up 1.03% to 1.001, showing signs of optimism on the currency as the ECB meeting will conclude later today. The market is expecting a 50bps rate hike from the central bank although 75bps is not ruled out as the ECB is behind of the curve.

British pound – The pound added 0.11% to 1.153 as the dollar weakened. A BoE policymaker has said that the effect from the high interest rate is yet to be felt on the ground and expects that interest rates will continue to increase to cool price pressure.

Japanese yen – The yen weakened by 0.66% to 143.740, the weakest level seen since the 1998 Asian financial crisis. The government is not ruling out an intervention to keep the yen from depreciating further, and mindful about the cost of defending the currency.

Chinese yuan – The yuan shed 0.16% to 6.966 as the market responded to China’s disappointing exports growth, which slowed down from 18.0% in July to 7.1% in August, further suggesting that the economy will decelerate further.

Korean won – The won declined by 0.79% to 1,384.41. A survey showed that South Korea’s economy is likely to continue slowing down due to external factors, weakening growth, high inflation and tighter financial conditions at home and abroad.

Australian dollar – The Aussie dollar climbed 0.50% to 0.677, as the market welcomed the higher-than-expected 2Q22 growth of 3.6% y/y (previous quarter: 3.3% y/y, consensus: 3.5% y/y). The economy was supported by strong domestic consumption despite higher prices and higher financing costs.

Commodities Highlights

Crude oil – Brent was down 5.20% to US$88.00 per barrel, and WTI also lost by 5.69% to US$81.94/barrel. This is despite the OPEC+ decision to cut production. However, the market’s pessimism on global growth outlook in the US, Europe and China remains.

Gold – Gold was up 0.95% to US$1,718/oz due to the weaker dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit slid 0.10% to 4.503, the weakest level in history. Throughout the day, the MYR was trading between 4.500 and 4.505. BNM’s monetary policy meeting is set to conclude later today, where we expect BNM to make another 25bps rate hike to address inflationary concerns.

KLSE – The FBM KLCI was up 0.21% to 1,491. Detailed transactions showed that local institutions were net buyers of RM51.3mil. Local retailers and foreign investors were net sellers of RM5.6mil and RM45.7mil respectively.

Fixed income – The 3-year was up +4.0bps to 3.380%, 5-year +6.0bps to 3.840%, 7-year +5.0bps to 3.990%, and 10-year +9.0bps to 4.120%.

Rates – The IRS yield for the (3Y) was up 6.50 bps to 3.685%, (5Y) +3.75bps to 3.838%, (7Y) +6.00bps to 3.935%, and (10Y) +6.00bps to 4.110%

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.495 and 4.505 while our resistance is pinned at 4.510 and 4.550.

Source: AmInvest Research - 8 Sept 2022