• Dollar losses its ground as risk-on mode re-emerges

Global Highlights

Dollar Index – The dollar fell 0.68% to 110.12 as risk-on sentiment further improved across the board, riding on the momentum of soft employment data released on Friday last week. However, the next focus will be on the inflation data where we expect the core inflation in October to ease to 0.5% m/m from 0.6% m/m in September and on the US midterm election.

US equities & sovereign bonds – Wall Street traded higher as the Dow Jones rose 1.31% to 32,827, S&P500 gained 0.96% to 3,807, and Nasdaq jumped 0.85% to 10,565.

The UST10Y benchmark yield increased by 5.5bps to settle at 4.214%, and the UST2Y added 6.3bps to 4.722%, widening the inverted differentials between the two to 50.8bps.

Euro – The euro rose 0.63% to 1.002, trading above parity level. A survey showed that investor morale in the euro area improved to -30.9 in November 2022 from -38.3 in October, beating market expectation of -35.0. The warmer than expected temperatures and high gas storage in Germany have eased concerns over energy shortages in the region.

British pound – The pound surged 1.19% to 1.151 as the dollar weakened. On the data front, the Halifax House Price Index grew 8.3% y/y but fell 0.4% m/m, the second straight monthly contractions. The slowing house price was due to the expected post-pandemic slowdown and soaring mortgage rate shock.

Japanese yen – The yen depreciated marginally by 0.01% to 146.63. Through the yield curve control (YCC) by the BoJ to keep the 10Y JGB under the ceiling of 0.25%, the central bank has been buying limitless amount of 10Y government bond. As of end-October, the BoJ held 73% of the 10Y JGB notes with the remaining maturity of at least seven years, up from 54.7% at the end of last year.

Chinese yuan – The yuan pared some of its previous sharp gains as it depreciated 0.63% to 7.231. Despite the heavy pandemic lockdown, China reported its highest daily Covid cases in six months at 5,600 where almost half of it comes from Guangdong, a manufacturing hub. The currency also being outweighed by the persistency of the officials in keeping the Zero-Covid Policy in place.

Korean won – The won gained sharply by 1.22% to 1,402, due to the weaker dollar. Amidst the worries over a credit crunch where an insurer postponed its bond repayment option and a local government-backed developer failing to repay bonds, authorities reassured the market that South Korea is not facing liquidity risk in its whole financial system.

Australian dollar – The Australian dollar climbed 0.14% to trade around 0.648. Having a trade surplus dynamic with China, the currency took a hit as China stand firm with its stringent Zero-Covid policy, dashing any hope for a shift of policy.

Commodities Highlights

Crude oil – Global oil prices went lower as China stays firm on its Zero-Covid policy. Brent fell 0.66% to US$97 per barrel while WTI dropped 0.89% to US$91 per barrel.

Gold – Gold prices edged lower by 0.37% to US$1,675/oz after a 3% rally in the previous session induced by the speculation of China’s reopening.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened 0.16% to 4.740 and traded within the range of 4.7485 and 4.7403. After two months of falling, the BNM international reserves climbed 0.7% to US$105.2bn as at end October 2022 from US$104.5bn as of 14th October 2022. The reserve now sufficient to cover 5.5 months of imports of goods and services and 1.1 times of the total short term external debt.

KLSE – The FBM KLCI inched higher by 0.27% to 1,442. Detailed transactions showed that the foreign investors were the net buyers with RM89.9mil, offset by the local institutions and retailers buying flow of RM82.7mil and RM7.2mil, respectively.

Fixed Income – The local bond market saw weak bid as the 3-year +7.0bps to 3.950%, 5-year +7.5bps to 4.270%, 7-year +12.5bps to 4.480%, while the 10- year +10.0bps to 4.500%.

Rates – The IRS yield for the 3-year +1.5bps to 4.045%, 5-year +2.0bps to 4.225%, 7-year +5.50bps to 4.400%, and 10-year +2.0bps 4.460%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.725 and 4.735 while our resistance is pinned at 4.740 and 4.750.

Source: AmInvest Research - 8 Nov 2022