• Fitch revises UK’s outlook to Negative but affirms the rating at AA

Global Highlights

Dollar Index – The dollar rose 0.94% to 112.26, erasing the sharp losses incurred recently. On the data front, the number of new unemployment claims spiked to 219k last week, well above 190k in the previous week and beating market forecast of 203k. The data showed initial signs of a cooling labour market that could nudge the Fed’s aggressive stance in the upcoming FOMC meeting on 1-2 November, although Feds officials still seem to be on the opposite side. Chicago Fed Evans stated that the rate could hit 4.50% - 4.75% next year, in line with our upside projections.

US equities & sovereign bonds – Wall Street was closed in the red as the Dow Jones fell 1.15% to 29,927, S&P500 dropped 1.02% to 3,745, and Nasdaq tumbled 0.68% to 11,073.

The UST10Y benchmark yield added 7.1bps to 3.824%, and the UST2Y added 10.8bps to 4.256%, widening the yields differential between UST10 and UST2 to -43.2bps.

Euro – Due to the stronger dollar the euro fell by 0.94% to 0.979. The ECB policymakers appeared increasingly worried that high inflation could become entrenched in the economy. Thus, they are looking at embarking on a more aggressive policy tightening, if necessary, even at the cost of an economic slump growth.

British pound – The pound tumbled 1.45% to 1.116. The BoE’s decision to intervene into the local debt market last week had prevented a fire sale amounting up to £50 billion. Otherwise, it would have taken the UK to the brink of a financial crisis. Meanwhile, the rating agency Fitch lowered the outlook for its credit rating for the UK’s government to Negative from Stable, owing to the risks associated with the recently announced mini budget.

Japanese yen – The yen weakened by 0.35% to 145.14, hovering near the psychological level of 145. The BoJ quoted in its quarterly report that next week’s reopening of international borders will boost tourism and help the economy to benefit from a weak yen amidst the rising electricity bills.

Chinese yuan – The yuan remained stable at 7.116 due to the Golden Week.

Korean won – The won strengthened by 0.58% to 1,403, retreating away from the 13-year low reported on 30th Sept. South Korea's foreign exchange reserves fell by nearly $20 billion in September to US$416.7 billion, the second-biggest monthly decline on record, as authorities ramped up the intervention into the FX market.

Australian dollar – The Australian dollar tumbled by 1.26% to 0.641. The trade surplus narrowed to AUD8.3 billion in August, the lowest in six month. It is also lower than AUD8.97 billion in the previous month and market forecasts of AUD10.1 billion, amid strengthening domestic demand and rising energy prices.

Commodities Highlights

Crude oil – Oil prices marked the third straight day of rising as the market is concern over the supply tight notion due to the production cut by OPEC+. Brent climbed 1.12% to US$94/barrel while WTI soared 0.79% to US$88/barrel.

Gold – Gold prices fell 0.22% to US$1,712/oz as the dollar rebounded. The next focus will be on US payroll data, which will be released tonight to gauge Fed’s policy path.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.14% to 4.637 and traded within the range of 4.6385 and 4.6297. All eyes will be on Budget 2023 which will be tabled later today.

We expect the MYR to trade between our support level of 4.625 and 4.635 while our resistance is pinned at 4.640 and 4.650.

KLSE – The FBM KLCI was closed 0.1% lower at 1,420 on last minute profit taking and ahead of Budget 2023. Detailed transactions showed that local institutions were net buyer of RM104.7mil. Local retailers and foreign investors were net sellers of RM32.00mil and RM72.7mil.

Rates – The IRS yield for the 3-year was +2.2bps to 3.902%, 5-year +3.0bps to 4.075%, 7-year +0.7bps to 4.217%, and 10-year +6.0bps to 4.400%.

Against major currencies – The ringgit had the upper hand against the EUR, GBP, and JPY, but lost against the AUD, CNY, SGD, THB, IDR, PHP, and VND.

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.625 and 4.635 while our resistance is pinned at 4.640 and 4.650.

Source: AmInvest Research - 7 Oct 2022