• Dollar Dominates

Global Highlights

Dollar Index – The dollar closed higher by 0.80% at 114.10, continuing its strengthening trend following the recent FOMC meeting. We expect the dollar to maintain its strengthening momentum in the near term despite concerns of a sharp slowdown or mild recession brewing driven by Fed’s continuous tightening momentum.

US equities & sovereign bonds – Wall Street was on the downside as the Dow Jones dropped 1.11% to 29,261, S&P500 sank 1.03% to 3,655, and Nasdaq sank 0.60% to 10,803.

The UST10Y benchmark yield jumped by 23.980bps to settle at 3.924%, and the UST2Y rose by 13.950bps to 4.341%, bringing the yields differential between UST10 and UST2 widened to -41.62bps. The yield curve inversion has been widening since mid-September and has been inverted since July this year.

Euro – The euro was down by 0.81% to 0.961, weakening further to the lowest level in years. Expect the euro to remain weak partly due to a stronger dollar outlook in the near term.

British pound – The pound continued its downwards trend, reaching the lowest level since 1985. It closed lower by -1.57% to 1.069. Concerns over the economic outlook despite tax cut measures introduced by the government remains high. Also the high inflation and lack of commitment by the BOE also raised worries over the economic performance.

Japanese yen – The yen depreciated by 1.00% to 144.750, continuing its depreciating trend despite direct intervention and warning against currency speculation by the government.

Chinese yuan – The yuan depreciated by 0.12% to 7.137, due to the stronger dollar. This is despite measures taken by the PBOC to support the currency, including raising the foreign exchange reserve ratio from zero percent to 20% earlier on Monday.

Korean won – The won fell by 1.55% to 1,431.58, due to the stronger dollar. The Bank of Korea cited the need for necessary measures to be taken to support the won, due to concerns of rising imported inflation coming from the weakening won. Throughout the year, the won now has depreciated by 20.3%.

Australian dollar – The Australian dollar continued its downward trend, weakened by 1.10% to 0.646. Market’s pessimism on the global economy is affecting the economic outlook of Australia.

Commodities Highlights

Crude oil – Oil prices closed at the lowest levels in nine months. The Brent dropped by 2.43% to US$84.06 per barrel and WTI fell by 2.58% to US$76.71 per barrel dragged by weaker demand and rising recession probability.

Gold – Gold prices down by 1.31% to US$1,622/oz, trading at the lowest levels as market flees into the dollar for safe haven.

Malaysia Highlights

Malaysian ringgit – The ringgit opened at 4.582 and was trading around 4.582 to 4.604 throughout the day, before closing at 4.604 (0.55% depreciation) by end of the trading day. The weakening of the ringgit was due to the stronger dollar. With the ringgit now having crossed 4.60 levels, we now expect more weakening trend on the ringgit, expected to weaken to 4.65 against the dollar in the near term. We expect the MYR to trade between our support level of 4.600 and 4.610 while our resistance is pinned at 4.615 and 4.630.

KLSE – The FBM KLCI down 0.84%, to 1,413. Detailed transactions showed that local institutions were net buyer of RM224.1mil. Local retailers and foreign investors were net sellers of RM15.3mil and RM208.7mil respectively.

Rates – The IRS yield for the 3-year up 10.50bps to 4.045%, 5-year up 12.00bps to 4.270%, 7-year up 13.50bps to 4.385%, and 10-year up by 16.00bps 4.570%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.600 and 4.610 while our resistance is pinned at 4.615 and 4.630.

Source: AmInvest Research - 27 Sept 2022