• Dollar loses ground ahead of US CPI data

Global Highlights

Dollar Index – The Dollar Index eased further by 0.62% to 108.33, away from the 20-year high it reached last week as the hawkish sentiment surrounding its Europe counterpart and ahead of US inflation data which will be released later tonight. The market is now expecting that the inflation rate will slow to 8.1% for August from 8.5% in the previous month.

US equities & sovereign bonds – Wall Street closed higher for the fourth consecutive session on Monday as the Dow Jones rose 0.71% to 32,381, S&P 500 climbed 1.06% to 4,110 and Nasdaq added 1.27% to 12,266. The UST10Y benchmark yield jumped 4.8bps to 3.358%, while the UST2Y added 1.5bps to 3.571%, narrowing the inverted differential between the two to 21.4bps.

Euro – The euro performed well, gaining 0.80% to 1.012, the highest level we have seen in almost a month, taking advantage from the weaker dollar and the advancement of the Ukrainian troops in the key Kharkiv region. A hawkish tone by ECB vice president Luis de Guindos Jurado also helped support the euro.

British pound – The pound rose 0.81% to 1.168, trying to recover from the level we last saw since 1985. On the data front, the British economy grew 0.2% m/m in July, rebounding from the 0.6% m/m contraction it had in the previous month but still missing market expectation of a 0.4% growth. The growth was supported mainly by the services sector.

Japanese yen – Despite the weaker dollar, the yen lost 0.26% to 142.84. The rapid depreciation of the yen has prompted some cautious tone among authorities including the BoJ itself, but we are still unclear on details of how they will intervene in the FX market.

Chinese yuan – The yuan was stable at 6.927 as the local market was closed due to the Mid-Autumn festival holiday. On a side note, the US administration is mulling to broaden restrictions on US shipments of semiconductors to China, fuelling tension between the two largest economies in the world.

Korean won – The won weakened 0.42% to 1,383, still near the 13-year low it hit recently.

Australian dollar – The Australian dollar rose 0.69% to 0.689, marking fourth straight days of rallying as risk appetite recovers in the market. This is in parallel with the surging prices of commodities, including iron ore and natural gas.

Commodities Highlights

Crude oil – Oil prices settled higher as Brent rose 1.25% to US$94 per barrel while WTI climbed 1.14% to US$87 per barrel, as weaker demand woes were overweighed by supply concerns heading into the winter.

Gold – The precious metal rose 0.45% to US$1,724/oz due to the weaker dollar and the expectation that inflation has slowed in the US.

Malaysia Highlights

Malaysian ringgit – The ringgit shed 0.11% to 4.503 despite the lower dollar and traded within the range of 4.505 and 4.495. Malaysia's wholesale and retail trade grew 41% y/y to RM130.7 billion in July 2022, led by motor vehicles’ sales value.

KLSE – The FBM KLCI closed higher by 0.10% to 1,498. Detailed transactions showed that foreign investors were net buyers with RM47.5mil, offset by local retailers and institutions with RM12.3mil and RM35.2mil flows, respectively.

Fixed income – Local bond market saw weaker bids the MGS 3-year benchmark yield was +1.5bps to 3.350%, 5-year +2.0bps to 3.770%, 7-year +2.0bps to 3.950%, 10-year +3/0bps to 4.060%.

Rates – The IRS yield for the (3Y) was +0.5bps to 3.580%, (5Y) +1.0bps to 3.735%, (7Y) +1.5bps to 3.835%, and (10Y) +2.0bps to 4.015%.

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

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 4.540 and 4.550.

Source: AmInvest Research - 13 Sept 2022