• Dollar weakened; other currencies rebounded.

Global Highlights

Dollar Index – The dollar weakened by 1.13% to 109.700, continuing its downward trend for the fourth day as the market maintains pessimism on the economic outlook for the US entering 2023.

US equities & sovereign bonds – Wall Street was mixed, where Dow Jones gained 0.01% to 31,839, S&P500 down 0.74% to 3,831 and Nasdaq lost 2.04% to 10,971.

The UST10Y benchmark was down 9.930bps to 4.003%, and the UST2Y down by 7.320bps to 4.404%, bringing the yields differential between UST10 and UST2 to widen to -37.50bps.

Euro – The euro gained 1.15% to 1.0081, trading above the parity for the first time since 19 Sept 2022. The ECB meeting is scheduled later, and we expect the ECB to hike by 75bps, in both October and December meetings, bringing the financing rate to 2.75% by the end of 2022.

British pound – The pound gained by 1.33% by end of the day to 1.163. According to the UK Foreign Secretary, the PM may postpone an economic plan that was originally set to go into effect on October 31 to reassess the economy.

Japanese yen – The Japanese yen gained by 1.05% to 146.370 against the dollar. Despite inflation shooting up above the 2% target and the weakening yen. Consensus is expecting the BoJ to maintain its ultra-loose monetary policy stance in the upcoming meeting tomorrow. The 10y JGB is also expected to be capped at 0.25%.

Chinese yuan – The yuan gained by 1.32% to 7.173. According to Bloomberg’s survey, China’s economy in September points to a slowdown, as vehicle, property sales weakened, and business sentiment is on the downside due to the effect from the zero-Covid policy and grim global economic outlook.

Korean won – The won gained by 0.48% to 1,426.20, due to the weaker dollar. Economic outlook in South Korea is not looking great either. The Business Survey Index for manufacturing in South Korea slipped to 73 in October 2022 and remained at its lowest level since October 2020.

Australian dollar – The Aussie dollar gained by 1.61% to 0.650. The inflation rate in Australia jumped to 7.3% y/y, above the market forecast of 7.0% y/y. The latest inflation number could force the RBA to rethink about its monetary policy path by making a larger interest rate increase. The RBA is scheduled to meet next week.

Commodities Highlights

Crude oil – Oil traded higher helped by US’ crude exports that rose to 5.1mn barrel per day and higher refinery activity. Brent ended the day 2.32% lower to $95.69/barrel, and WTI was up by 3.04% to US$87.91/barrel.

Gold – Gold up by 0.69% to US$1,665/oz, supported by the weaker dollar.

Malaysia Highlights

Malaysian ringgit – The ringgit gained by 0.46% to 4.714 and traded between 4.714 - 4.735 throughout the day.

Global external headwinds, domestic noises, and interest rates differential will remain major drawback to the ringgit. We project the USDMYR in 4Q22 would settle at 4.70 against the dollar and could weaken further to 4.80 in the 1Q23.

We expect the MYR to trade between our support level of 4.710 and 4.720 while our resistance is pinned at 4.725 and 4.735.

KLSE – The FBM KLCI gained by 0.73% to 1,455. Detailed transaction showed that local institutions and local retailers were net seller of RM19.6mil and RM62.8mil respectively. Foreign investors were net buyer of RM82.4mi.

Fixed Income – The MGS yield for the 3-year down 8.0bps to 3.855%, 5-year down 5.00bps to 4.220%, 7-year down 22.00bps to 4.350%, and 10-year down by 12.00bps 4.440%.

Rates – The IRS yield for the 3-year lower by 7.50bps to 4.030%, 5-year lower 10.50bps to 4.220%, 7-year lower 9.00bps to 4.370%, and 10-year lower 11.00bps to 4.470%.

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

Source: AmInvest Research - 27 Oct 2022