• Dollar’s weakness provides some reliefs for others

Global Highlights

Dollar Index – The dollar dipped 0.93% to 110.95, the lowest level since early October, following weak economic data amidst elevated interest rates and high inflation. The S&P/Case-Schiller home price index fell 1.6% m/m in August, lower than 0.7% market expectation and after a 0.8% decline in July. It marks the biggest monthly drop since March 2009. On a yearly basis, growth has decelerated to 13.1% y/y, down notably from 16% jump in the previous month. Taking the cue from the deteriorating growth outlook, we expect the house price to remain soft.

US equities & sovereign bonds – Wall Street closed higher across the board as investors welcomed upbeat earnings results. Dow Jones gained 1.07% to 31,837, S&P500 rose 1.63% to 3,859 while Nasdaq jumped 2.25% to 11,199.

The UST10Y benchmark yield fell 14.0bps to 4.102%, while the UST2Y also fell by 2.7bps to 4.477%, widening the inverted differential between the two to 37.5bps.

Euro – The euro rallied 0.93% to 0.997 for the third straight day ahead of the ECB decision. Following a survey of 153 banks, the ECB stated that the euro zone banks will tighten credit access including for both housing loans and consumer credit further in 4Q22.

British pound – The pound rose 1.72% to 1.147. While the optimism relief was induced by the appointment of Rishi Sunak as the new PM, data suggests deteriorating economic conditions. The Confederation of British Industry (CBI) gauge of manufacturing optimism in the UK tumbled to -48 for 4Q22, marking the fourth straight quarters of negative territory, much worse than -21 in 3Q22 and the lowest level since 2Q20 as manufacturers are still feeling the adverse effects of high input prices and lack of “availability of materials”.

Japanese yen – The Japanese yen regained its ground as it strengthened 0.66% to 147.93. The currency remained under pressure from the accommodative policy by the central bank despite the speculation on intervention by the government. The BoJ will meet up later this week to decide on its policy, we are not expecting any changes of its stances on its policy.

Chinese yuan – The yuan weakened slightly by 0.08% to 7.269. The uncertainties over the Chinese economy remained following the consolidation of power by the President Xi and whether the new leaderships will prioritise the economic growth.

Korean won – The won gained by 0.45% to 1,433. On the data front, the consumer sentiment indicator in South Korea dropped to 88.8 in October 2022, from 91.4 from September same year and 106.8 in October 2021. This translates to 2.8% decline in m/m and 18% decline in y/y basis. Most components showing lower reading including current living standards, prospective economic conditions, and current household savings.

Australian dollar – The Aussie dollar surged 1.30% to 0.639. The country’s treasurer Jim Chalmers has tabled the first Labour budget in almost a decade. With households are getting wary of their finance amidst higher cost of living pressure, the budget is expecting a slowdown in economic growth this year at 3.25%, compared to the previous forecast of 3.5%. On the bottom line, the economy is benefitting slightly from the soaring commodity prices with an improved deficit to AUD$32bn but the spending challenge remains over the next few years.

Commodities Highlights

Crude oil – Oil prices rose as supply worries re-emerged but limited due to the uncertain economic activity in the US and China. Brent gained 0.28% to US$93 per barrel while WTI rose 0.87% to US$85 per barrel.

Gold – Gold gained 0.21% to US$1,653/oz as the dollar’s slight relief provide some upward propel for the gold.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened slightly by 0.04% to 4.736 and traded within the range of 4.7417 and 4.7335.

On the data front, Malaysia’s leading economic index rose 1.6% m/m for August 2022, partly regained some losses it incurred last time when it declined 2% m/m. This is the highest reading since November last year as it was supported by the increase of number of housing units approved, real imports of semiconductors, real money supply and number of new companies registered.

We expect the MYR to trade between our support level of 4.720 and 4.735 while our resistance is pinned at 4.740 and 4.745.

KLSE – The FBM KLCI fell 0.14% to 1,444. Detailed transactions showed that the foreign investors were the net buyers with RM51.8mil positions, offset by the local institutions and retailers with RM15.2mil and RM38.6mil, respectively.

Fixed income – Local bond market saw a tepid day as the 3-year -0.5bps to 3.935%, 5-year -4.5bps to 4.270%, and 10-year -1.0bps to 4.560%, but 7-year remained at 4.570%.

Rates – The IRS yield for the (3Y) -2.0bps to 4.105%, (5Y) -3.5bps to 4.325%, (7Y) -4.5bps to 4.460%, and (10Y) -2.0bps to 4.580%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.720 and 4.735 while our resistance is pinned at 4.740 and 4.745.

Source: AmInvest Research - 26 Oct 2022