• Dollar Continues to Weaken.

Global Highlights

Dollar Index – The dollar continued its weakening trend, closing 1.50% lower to 110.065, where market reassess their position that the Fed might not be too aggressive in tightening the interest rates in the future as US job openings fell in August and given bleak global and US economic outlook.

US equities & sovereign bonds – Wall Street gained as the Dow Jones up 2.80% to 30,316, S&P500 up 3.06% to 3,791, and Nasdaq increased 3.34% to 11,176.

The UST10Y benchmark yield down by 0.580bps to settle at 3.633%, and the UST2Y down by 2.080bps to 4.093%, bringing the yields differential between UST10 and UST2 narrowed to -45.97bps.

Euro – The euro was up by 1.63% to 0.999 against the dollar. The ECB President emphasised that it is difficult to confirm whether inflation has peaked or not in the Euro Area, suggesting that further hikes should be expected from the ECB to cool off inflation.

British pound – The pound gained by 1.35% to 1.148, rebounding back to the same level prior the BOE’s intervention in the bond market. The BOE’s purchasing the long-term gilts has been able to calm the bond market, where the 30y gilt now yields at 4.030%, close to the same level prior intervention.

Japanese yen – The yen appreciated by 0.29% to 144.130, due to the weaker dollar. The yen now is trading firmly below the 145-level due to softer data coming from the US side and the possibility of Fed slowing the monetary policy tightening. But we expect yen to remain weak and continue to trade around the current level due to divergence of the BOJ and other global central bank’s monetary policy.

Chinese yuan – The yuan remained at 7.116, despite the dollar weakened.

Korean won – The won gained by 1.09% to 1,426.29 due to the weaker dollar. South Korea’s economy continues to show weaknesses, as latest PMI declined from 47.6 in August to 47.3 in September, due to fall in new orders among South Korea’s trading partners.

Australian dollar – The Australian dollar weakened by 0.23% to 0.650, where the RBA only made a 25bps rate hike, pushing the interest rate to 2.60% during the latest meeting. The slower increase is due to weaker global economy. Domestically, house prices have dropped for five months in a row.

Commodities Highlights

Crude oil – Brent gained by 3.31% to $91.80/barrel, and WTI up by 3.46% to US$86.52/barrel, trading higher as market is expecting OPEC+ to cut production by around 1 million barrels per day to support oil prices when they meet later today.

Gold – Gold price rose by 1.54% to US$1,726 due to the weaker dollar, and currently trading at the same level during mid-September.

Malaysia Highlights

Malaysian ringgit – The ringgit gained by 0.11% to 4.644 and traded within the range of 4.641 and 4.649 throughout the day. Expect the ringgit to trade firmer until Friday prior the Annual Budget and the US labour market data. We expect the MYR to trade between our support level of 4.635 and 4.645 while our resistance is pinned at 4.650 and 4.660.

KLSE – The FBM KLCI up 0.84%, to 1,409. Detailed transactions showed that local institutions and local retailers were net sellers of RM33.0mil and RM26.6mil respectively. Foreign investors were net buyer of RM59.6mil.

Fixed Income – The MGS yield for the 3-year remained at 3.795%, 5-year down 6.00bps to 4.034%, 7-year down 13.00bps to 4.170%, and 10-year down by 8.00bps 4.360%.

Rates – The IRS yield for the 3-year down 7.20bps to 3.783%, 5-year down 10.50bps to 3.970%, 7-year down 6.00bps to 4.110%, and 10-year down by 5.50bps 4.300%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.635 and 4.645 while our resistance is pinned at 4.650 and 4.660.

Source: AmInvest Research - 5 Oct 2022