• Dollar lost its momentum, US equity rebounded

Global Highlights

Dollar Index – The dollar ended the day weaker by 1.12% and closed at 112.039, pausing its two-week upward trend as investors reassessed their outlook for the global market, as the sentiments in the UK and China slightly improved.

US equities & sovereign bonds – Wall Street rebounded, where Dow Jones gained 1.86% to 30,186, S&P500 up 2.65% to 3,678, and Nasdaq up 3.43% to 10,676.

The UST10Y benchmark fell 0.800bps to 4.010%, and the UST2Y fell by 5.260bps to 4.443%, bringing the yields differential between UST10 and UST2 to narrow to -47.75bps.

Euro – The euro gained by 1.22% to 0.984 due to the weaker dollar. ECB Vice President expects the Euro will stabilise in the upcoming months as the dollar’s strengthening trend is likely to reverse soon.

British pound – The British pound rallied by 1.66 to 1.356, and the UK gilts, on the other hand dropped by 40bps to 3.943%, welcoming the news that the new Chancellor will be reversing most of the tax measures that were previously announced, including the tax rate deduction for top income earners.

Japanese yen – The Japanese yen continued its depreciating trend against the dollar, weakening by 0.25% to 149.04 against the dollar.

On a macro front, Japan’s industrial production continued its expansion for the third month, increasing by 3.4% m/m (July: 0.8% m/m), and above the consensus expectation of 2.7% m/m. The main driver for the growth was production in the manufacturing sector, which grew by 3.5% m/m (July: 0.8% m/m) .

While production showed a strong gain relative to the previous month, it is unlikely to sustain further. Japan’s manufacturing PMI has been on a downward trend since March (54.1) this year, reading at 50.8 in September, mostly due to a global slowdown as new orders from China, South Korea, Europe and the US dropped.

Chinese yuan – The yuan lost by 0.06% to 7.197. China’s third quarter GDP publication was delayed, and no update on the new publication date is provided. Consensus expects the 3Q GDP to grow by 3.4% y/y (2Q22: 0.4% y/y).

Korean won – The won depreciated by 0.46% to 1,435.23. The Bank of Korea (BoK) said that it is difficult to provide further policy guidance due to volatility from the external front, including the Fed’s aggressive tightening that weakened the won currency significantly.

Australian dollar – The Australian gained by 1.48% to 0.629. Focus will be on the Reserve Bank of Australia’s (RBA) minute meeting that will be published later today.

Commodities Highlights

Crude oil – Oil prices continued its downward trend throughout the second half this year, as investors are worried about the deteriorating economic outlook entering 2023. Brent down by 0.01% to $91.62/barrel, and WTI was down by 0.18% to US$85.46/barrel.

Gold – Gold gained by 0.34% to US$1,650, attracting some buying on the commodity as the dollar weakened.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened by 0.26% to 4.717 and traded within the 4.7020 - 4.7197 range throughout the day.

The Prime Minister has said that the 2023 Annual Budget is likely to be tabled again after the general election.

We expect the MYR to trade between our support level of 4.700 and 4.710 while our resistance is pinned at 4.720 and 4.730.

KLSE – The FBM KLCI up 0.27%, to 1,386. Detailed transaction showed local institutions and local retails were net buyer of RM43.6mn and RM9.9mn respectively. Foreign investors were net seller of RM53.5mn.

Rates – The IRS yield for the 3-year remained at 4.015%, 5-year up by 1.25bps to 4.220%, 7-year up by 0.50bps to 4.380%, and 10-year down 6.50bps to 4.485%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.700 and 4.710 while our resistance is pinned at 4.720 and 4.730.

Source: AmInvest Research - 18 Oct 2022