• Dollar drops to three-month low as risk-on mode further improves.

Global Highlights

Dollar Index – The dollar was bearish for the second straight days as it tumbled sharply by 1.77% to 106.29, the lowest level since August, following the softer than-expected US CPI data which nudged market players to tone down their perception on hawkish Fed. Investors welcomed the news as risk-on mode continues to recover and pronounced buying were seen on the yen and euro.

But Fed officials’ remarks were somewhat a mixed bag. Dallas Fed President Logan still insisting that “there is still a long way to go” while the Philadelphia Fed President Harker indicated that the Fed rate hike pace could slow soon.

On the data front, preliminary report shows that the consumer sentiment in the US fell to 54.7, the lowest level since July, for November and down from 59.9 in October. The lower reading can be attributed to the high financing cost and elevated inflation.

US equities & sovereign bonds – Wall Street was traded higher as the Dow Jones rose 0.10% to 33,748, S&P500 climbed 0.92% to 3,993 while the Nasdaq rose 1.88% to 11,323.

The benchmark UST10Y yield was stable at 3.813% as the US bond market was closed on Friday due to the Veterans Day holiday.

Euro – Due to the weaker dollar, the euro rose sharply by 1.35% to 1.035, a level we have not seen since early July 2022. Meanwhile, the ECB is seen to continue raising its interest rate to the point where it can put the euro area’s economy to a halt to bring down the inflation. One of the Executive Board member Schnabel said that raising the rates to restrictive level is needed even the odd for a recession is heightening.

British pound – The pound gained 0.97% to 1.183 and moving away from the almost 40-year low it reached recently. The market is now expecting that the BoE to remain on its tightening path as the UK economy contracted less than expected. According to the report, the UK economy shrank 0.2% m/m in the third quarter of 2022 (cons.: -0.5% m/m), the first contraction since 2Q21 and down from 0.2% growth in the previous quarter. It was dragged by both production and services sectors while both household spending and business investment on the downside as well, weighed by high inflation and rising interest rates.

Japanese yen – The yen also benefitted from the falling dollar as it gained sharply by 1.54% to 138.81. It was also supported by the hint of adjustment of yield curve control (YCC) if the inflation and wage growth does indeed is in line with the central bank’s target.

Chinese yuan – The yuan appreciated 1.24% to 7.097 as the authority announced refinement of Covid where it will reduce the mass testing and release people from quarantine camps. This is despite the virus outbreak have been accelerating for the past weeks. At the same time, 16-point rescue package was announced to help the shaky real estate sector.

Korean won – The won strengthened 4.27% to 1,319 amidst rally relief by the dollar. Nonetheless, intensified geopolitical tension in the region are seen as North Korea is conducting more “aggressive” provocation using nuclear and missile capabilities.

Australian dollar – The commodity-linked Aussie dollar surged 1.27% to 7.097.

Commodities Highlights

Crude oil – Oil prices traded higher as the easing of China’s covid policy helped spur some optimism in the world’s top oil importer’s economy. Brent climbed 2.48% to US$96 per barrel while WTI surged 2.88% to S$89 per barrel.

Gold – Gold prices for the second straight days as investors tone down their Fed’s hawkishness path. It traded higher for the second consecutive session, gaining 0.90% to US$1,771/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit appreciated 1.59% to 4.623 and traded within the range of 4.609 and 4.6946. Report showed that Malaysia’s economy in the third quarter of 2022 expanded 14.2% y/y, much faster than the 8.9% y/y in the previous quarter. This is the strongest quarterly GDP performance reported since the 2Q21, where the economy grew by 15.9%.

Although on seasonally-adjusted annual growth basis the economy grew strongly, on a quarter-on-quarter basis, we saw some loss of momentum. Malaysia’s economy grew by 1.9% q/q, slower than 2Q22’s growth of 3.5% q/q.

While the 3Q22 number is strong, headwinds are expected to kick in from 4Q22 onwards. Already we are witnessing some signs of stress from the manufacturing sector. With rising living as well as business cost adding pressure, the likelihood for 4Q22 GDP to slow down remains high on our cards. Headwinds are expected to remain as we move into 2023.

Hence, we are expecting overall growth for 2022 to be at 8.5% - 9.0% with fourth quarter 2022 GDP is projected to hover around 6.0% - 8.0%, supported mainly by private consumption, external trade and low base effects (4Q21: 3.6%). For 2023, we are looking at slower growth of 4.5% as the downside risks become more pronounced.

KLSE – The local bourse’s FBM KLCI soared 1.27% to 1,468. Detailed transactions showed that the foreign investors and local institutions were the net buyers with RM105.96mil and RM10.01mil positions, respectively, offset by the local retailers’ selling positions of RM115.97mil.

Rates – The IRS yield for the (3Y) 12.2bps to 4.033%, (5Y) 12.5bps to 4.145%, (7Y) -11.5bps to 4.290% and (10Y) -10.2bps to 4.398%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.590 and 4.600 while our resistance is pinned at 4.670 and 4.680.

Source: AmInvest Research - 14 Nov 2022