• The BOE made 50bps rate hike. Malaysia’s CPI to be published today.

Global Highlights

Dollar Index – The dollar continued its strengthening momentum post FOMC meeting, up by 0.64% to 111.353. The hawkish momentum would continue to lend support for the dollar. We foresee a dollar play in the near term.

US equities & sovereign bonds – Wall Street showed the Dow lost 0.35% to 30,077, S&P 500 down 0.84% to 3,758 and Nasdaq plunged 1.37% to 11,067.

The UST10Y benchmark yield was up 18.39bps to settle at 3.714%, while the UST2Y was at 4.122% (+7.38 bps), bringing the differential between UST10 and UST2 to -40.84bps.

Euro – The euro closed marginally lower by 0.01% to 0.984 due to the stronger dollar. The currency is expected to remain on the upside for the rest of 2022 despite signs of ECB expected to remain aggressive with its rate hikes from the current level of 1.25%. It is despite the risk of pushing the Eurozone economy into a downturn this year to keep inflation in check.

British pound – The pound opened and traded around at 1.138 against the dollar and depreciated to 1.126 after the BOE announced its 50bps rate hike to 2.25%. We expect the pound’s weakness to extend further due to hawkish tone by the Fed that would push up dollar stronger and poor commitment from BOE. The GBPMYR closed at 5.17 yesterday, down by 0.2%. In the near term, we expect pound to remain weak against ringgit by between 0.2% and 0.5%. On the same tone, we expect pound to remain weak against the dollar by between 0.2% and 0.4% from yesterday’s close of 1.13.

Japanese yen – The yen gained by 1.16% to 142.39. Following the announcement by the BOJ to maintain the ultra-low policy, the yen depreciated above the psychological level of 145, forcing the government to directly intervene the yen.

Chinese yuan – The yuan fell by 0.40% to 7.078 due to the stronger dollar, surpassing the 7.000 threshold and came close to the same level back in the 1H2020 when the first wave of the pandemic occurred, when the yuan was trading around 7.100.

Korean won – The won depreciated by 0.40% to 1,412.82. It continued its weakening trend after the interest rates hike by the Fed. It is despite the Korean government has pointed out that they will introduce necessary measure to support the won, after depreciating to the lowest level in 13 years.

Australian dollar – The Aussie dollar gained by 0.23% to 0.665 despite a stronger dollar. But the currency is expected to remain on the weaker side, as RBA could tone down the pace of its interest rates hike moving forward, on concern over the economic outlook.

Commodities Highlights

Crude oil – Brent was up 0.70% at US$90.46 per barrel, and WTI was up by 0.66% to US$83.49/barrel, reflecting concerns on supply constraints and Russia’s latest effort to send more army reserves to Ukraine. But oil prices is expected to remain firm as more economies are expected to enter a slowdown soon.

Gold – Gold lost 0.16% to US$1,671/oz, still trading at the lowest level this year and currently under pressure by the stronger dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened by 0.31% to 4.568 due to the stronger dollar. Throughout the day, the ringgit was trading around 4.553 – 4.571. The ringgit has depreciated 9.6% ytd this year. BNM reported that the daily FX turnover jumped to US$22.2 bil, the highest record since 2017 in response to the interest rates hike made by the Fed. And the inflation numbers for August would be announced today. We expect headline inflation to be at 4.8% y/y, up from 4.4% y/y July.

KLSE – The FBM KLCI lost by 0.55% to 1,439. Detailed transaction showed that local institutions and local retails were net buyers of RM78.1mil and RM45.3mil respectively. Foreign investors were net sellers of RM123.4mil.

Fixed Income - The MGS 3y up by 4.0bps to 3.550%, 5Y up 5.0bps to 4.020%, 7y up 9.0bps to 4.230%, and 10y remained at 4.222%.

Rates – The IRS yield for the 3-year up 10.00bps to 3.885%, 5-year up 8.80bps to 4.063%, 7-year up 8.50bps to 4.200%, and 10-year up by 7.50bps 4.360%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.550 and 4.580 while our resistance is pinned at 4.600 and 4.650.

Source: AmInvest Research - 23 Sept 2022