• Dollar weakens; other currencies rally

Global Highlights

Dollar Index – The dollar closed lower by 0.64% to 109.003, ending the week on a downward trend. The Consumer Price Index for August is due to be published on Tuesday, where headline inflation could recede from 8.5% (July’s number), but core inflation could remain higher at around 6.0%. This could push the DXY to be slightly stronger this week, as markets expect the Fed to remain hawkish prior to the next meeting on 22 September.

US equities & sovereign bonds – Wall Street rallied. Dow Jones gained 1.19% to 32,152, S&P 500 up 1.53% to 4,067 and the tech heavyweight Nasdaq rose 2.11% to 12,112. The UST10Y benchmark yield was at 3.310%, while the UST2Y was at 3.557%, bringing the differential between them to -24.68bps.

Euro – The euro edged up 0.45% to 1.004 due to the weaker dollar. Energy related issues continued to dominate the news in Europe after Russia cut off the entire supply. Representative EU members have agreed on several measures including putting a price cap on imported gas.

British pound – The pound added 0.74% to 1.159 as the dollar weakened. The BoE meeting this week has been rescheduled to next week on Thursday as a mark of respect to the Queen’s passing.

Japanese yen – The yen gained 1.14% to 142.470, cooling off worries that it could depreciate further, after reaching to the lowest level in 25 years. The Japanese government has said it will continue monitoring the yen and intervene in the currency market if necessary.

Chinese yuan – The yuan rose 0.45% to 6.927 due to the weaker dollar. China’s authorities continued to implement a zero-Covid policy on several cities as cases increase, pushing more analysts to downgrade their outlook on the economy.

Korean won – The won inched up by 0.24% to 1,377.41 but still remained on the weaker side so far this year. The last time the won depreciated sharply was back during the GFC, where it dropped to around the 1,600 levels.

Australian dollar – The Aussie dollar climbed 1.33% to 0.684, as the market continued to expect the RBA to tighten its monetary policy in the upcoming meeting in October, but the pace of the increase will be slower than the previous meetings of a 50bps rate hike.

Commodities Highlights

Crude oil – Brent jumped 4.14% at US$92.84 per barrel, and WTI also surged by 3.89% to US$86.79/barrel due to Russia’s threat to halt oil and gas supplies to some buyers. Oil prices are expected to remain firm due to weaker economic prospect, tighter financial conditions, and China’s continuous zero Covid policy.

Gold – Gold was up 0.50% to US$1,717/oz due to the weaker dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit gained 0.10% to 4.498 due to the weaker dollar and stronger yuan. Throughout the day, the MYR was trading between 4.495 and 4.501. We forecast our USDMYR to be at 4.38 – 4.45 year end.

On the macro front, the IP Index grew by 12.5% y/y, boosted by output in the manufacturing and the electricity sectors. But on a month-on-month basis, the index declined by 4.7%. For now, we are maintaining our full- year growth projection at 6.4% in 2022 and ease to 4.8% in 2023.

KLSE – The FBM KLCI was up 0.12% to 1,497. Detailed transactions showed that local institutions and local retails were net sellers of RM25.4mil and RM26.5mil respectively. Foreign investors were buyers of RM51.9mil.

Fixed Income - The MGS 3y down -0.5bps to 3.335%, 5Y -2.0bps to 3.750%, 7y down -3.0bps to 3.930%, and 10y down -3.0bps to 4.030%.

Rates – The yield for the 3-year was down 5.0bps to 3.575%, 5-year -5.5bps to 3.725%, 7-year -5.0bps to 3.820%, and 10-year -4.5bps to 3.995%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.490 and 4.500 while our resistance is pinned at 4.510 and 4.550.

Source: AmInvest Research - 12 Sept 2022