• Risk-on mode provide supports for cyclical currencies

Global Highlights

Dollar Index – The dollar pared its previous session gains as it fell 0.24% to 106.40 following the release of US producer inflation data. Driven by lower costs in services and passenger cars index, the PPI in the US grew by 8.0% y/y for October, much lower than 8.4% in September and market consensus of 8.3% y/y. This has bolstered risk-on mode drawn out since the softer-than expected CPI data last week.  

On another note, Fed’s Vice Chair Barr warned that the US economy would take significant softening as the fight to bring down inflation will continue.

US equities & sovereign bonds – Wall Street trembled after the initial gains and closed slightly higher compared to previous session. The Dow Jones edged higher by 0.17% to 33,593, the S&P500 climbed 0.87% to 3,992 while the tech heavyweight Nasdaq jumped 1.45% to 11,358.  

The benchmark UST10Y yield lost 8.4bps to 3.770% while the UST2Y fell 5.1bps to 4.338%, widening the inverted differential between the two to 56.9bps.

Euro – The euro gained 0.21% to 1.035 as eurozone’s GDP 2nd estimate figure was in line with the 1st estimate. Report showed that the region grew 2.1% y/y which marked the sixth consecutive quarters of expansion but the weakest one yet. But the economy remained vulnerable due to the high inflation, ongoing energy crisis, and tighter financial conditions.  

Added to that, the improvement in the economic sentiment index may have provided some support for the currency. The index rose to -38.7 in November from -59.7 in the previous month, the highest reading in June but still in the negative zone. On another note, the market wavered after reports stated that Russian missiles crossed into Poland and killed two people in the countryside near Ukraine, inducing worries for an escalating Ukraine-Russia tension.

British pound – The pound rose 0.93% to 1.187, trading around Aug’22 level. The still healthy labour market data has prompted the expectation of tightening monetary policy by the BoE to continue despite the imminent economic slump. The unemployment rate marginally ticked up to 3.6% in Sept’22 from 3.5% while the average weekly earnings including bonuses expanded 6.0% y/y during the three months to Sept’22, beating market forecasts of 5.7% y/y.

Japanese yen – The yen was pressured by the weak GDP data as it weakened 0.78% to 139.89. In the three months into September 2022, the Japanese economy contracted 0.3% q/q due to global inflationary pressures and a weakening in the yen, missing the market forecast of 0.3% growth. On annual changes basis, it shrank 1.2%, missing market expectations of 1.1% growth. This was influenced by weak private consumption following the rising cost pressures, a marked slowdown in business investment, and the fastest growth in imports in seven quarters due to a historic slide in the yen which recently, prompted a currency market intervention.

Chinese yuan – The yuan appreciated by 0.40% to near 7.0 level at 7.069, supported by the positive sentiment propagated by its President Xi Jinping and US’s Joe Biden calls for reduced tension as the two met in Indonesia during G20 summit. On the data front, China's retail trade unexpectedly contracted 0.5% y/y in Oct’22, reversing a 2.5% rise in the previous month and indicating the first dip in five months, as consumption was weak attributed to the impact of mounting COVID infections and stringent regulations.

Korean won – The won resumed its strengthening trend as it gained 0.67% to 1,318, around Aug’22 level. Export prices increased by 13.7% y/y in October, slowing from September's 14.7% y/y increase as manufactured items contributed most to y/y growth. Meanwhile, import prices rose 19.8% y/y and 1.5% m/m in September, compared to 24.2% y/y and 1.5% m/m in August, with raw materials contributing the most to the growth, possibly fuelling imported inflation more into the South Korean economy.

Australian dollar – The commodity-linked Aussie dollar surged 0.81% to 0.676. The recent RBA meeting minutes showed that the Board members decided future decision will be flexible where it can be either paused or a larger rate hike depending on the incoming data.

Commodities Highlights

Crude oil – Oil prices traded higher, supported by supply concerns and easing inflation which induced the risk-on mode. Brent rose 1.1% to US$95 per barrel while WTI surged 1.4% to US$87 per barrel.

Gold – Gold prices rallied for the fifth consecutive sessions and closed at US$1,779, which was 0.43% higher than the previous day. Expectations of slower rate hike by the Fed helped supported the precious metal.

Malaysia Highlights

Malaysian ringgit – The ringgit closed stronger by 1.14% against the USD to 4.543 and traded within the range of 4.5957 and 4.5398 as the positive tone set in the G20 meeting provide healthy support for the ringgit. We expect the MYR to trade between our support level of 4.570 and 4.580 while our resistance is pinned at 4.610 and 4.620.

KLSE – The local bourse’s FBM KLCI tumbled 0.92% to 1,451 as sentiment turned mixed ahead of the GE15. Detailed transactions showed that the foreign investors were the net sellers with RM185.5mil positions, offset by the local institutions and retailers buying flow of RM149.9mil and RM35.6mil.

Rates – The IRS yield for the (3Y) -7.5bps to 4.000%, (5Y) -5.8bps to 4.123%, (7Y) -10.0bps to 4.220% and (10Y) -6.0bps to 4.360%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.570 and 4.580 while our resistance is pinned at 4.610 and 4.620.

Source: AmInvest Research - 16 Nov 2022