• Dollar Continues to Dominate

Global Highlights

Dollar Index – The dollar gained marginally by 0.003% to 114.106, and still trading at its highest following the recent FOMC meeting. Rapid US interest rate increases have raised the risk of a recession, but it is likely to be caused by an outside shock rather than from a collapse of a U.S. economy that remains resilient, St. Louis Fed president James Bullard commented.

Bullard, who has been among the most hawkish of Fed policymakers in encouraging faster and larger rate increases thinks the Fed plans to raise the target policy rate to around 4.5% by the end of 2022 has pushed U.S. monetary policy to a "restrictive" level that will slow the economy and ease inflation.

On the data front, the US new home sales data surged 28.8% to a seasonally adjusted annual rate of 685k in August, from a revised 532k in July.

August figures is the second-biggest jump and a sharp reversal of a drop of 8.6% in July compared with the initial estimate of a 12.6% drop to 511k.

US equities & sovereign bonds – Wall Street was mixed as the Dow Jones dropped 0.43% to 29,135, S&P500 sank 0.21% to 3,647, and Nasdaq gained 0.25% to 10,830.

The UST10Y benchmark yield jumped by 2.070bps to settle at 3.945%, and the UST2Y down by -5.770bps to 4.283%, bringing the yields differential between UST10 and UST2 narrowed to -33.78bps.

Euro – The euro was down by 0.16% to 0.959. On worries over the energy issue related to the European economy. The EU leaders discussed to put a wide price cap on all gas imports. The ECB president is expected to speak today, where a clearer path of the interest rates can be expected.

British pound – The pound gained by 0.41% to 1.073, but still trading at lowest levels due to market’s pessimism on the UK’s economy due to higher energy prices, worsening cost of living, and high interest rates environment.

Japanese yen – The yen depreciated by 0.03% to 144.800, continuing its depreciating trend.

Chinese yuan – The yuan depreciated by 0.54% to 7.176, due to the stronger dollar. The PBOC plans to introduce more measure to support the currency from depreciating further.

Korean won – The won gained by 0.61% to 1,422.81. Consumer sentiments improved from 88.8 points to 91.4 points despite the high interest rates and high inflation environment. However, the rising cost of living issues is a key concern.

Australian dollar – The Australian dollar weakened by 0.33% to 0.644, as the OECD recently downgraded Australia’s growth forecast from 2.3% to 2.0% for 2023, reflecting high global interest rates environment to keep inflation in check.

Commodities Highlights

Crude oil – Oil prices rose with Brent up by 2.63% to $86.27/barrel, and WTI rose by 2.33% to US$78.50/barrel. Higher oil price is due to concerns over supply concerns from the Hurricane Ian in the Gulf of Mexico in the US.

Gold – Gold price rose by 0.40% to US$1,628, amid strong demand for the safe haven in view of the high volatility and uncertainty. but still trading at the low level due to the stronger dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit fell by 0.16% to 4.611 and traded within the range of 4.6042 and 4.5817. The World Bank upgraded Malaysia’s GDP forecast to 6.4%, up from 5.5% previously due to the higher than expected 2H performance induced by the full reopening of the economy. However, it noted that there are headwinds and downside risk for domestic economy in 2023 coming from rising inflation, sluggish labour market recovery, geopolitical risk and the shrinking of the fiscal space.

We expect the MYR to trade between our support level of 4.605 and 4.615 while our resistance is pinned at 4.620 and 4.630.

KLSE – The FBM KLCI down 0.15%, to 1,411. Detailed transactions showed that local institutions and local retailers were net buyer of RM36.6mil and RM58.4mil respectively. Foreign investors were net sellers of RM95.0mil.

Rates – The IRS yield for the 3-year down 7.50bps to 3.970%, 5-year down 12.00bps to 4.150%, 7-year down 13.00bps to 4.255%, and 10-year down by 11.00bps 4.450%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.605 and 4.615 while our resistance is pinned at 4.620 and 4.630.

Source: AmInvest Research - 28 Sept 2022