• Dollar gained on Friday.

Global Highlights

Dollar Index – The dollar gained by 0.22% to 106.930, after being on the downward trend for the past two weeks, as more signs of inflation in the US continue to ease, plus the Fed will slow down its interest rates hikes.  

Focus this week will be on the FOMC minutes, where a clearer picture will be provided on the interest rates outlook.

US equities & sovereign bonds – Wall Street traded higher as the Dow Jones up 0.59% to 33,746, S&P500 up 0.48% to 3,965 and the Nasdaq up 0.01% to 11,146.  

The benchmark UST10Y yield up 6.31bps to 3.8288% and the UST2Y up 8.09bps to 4.5329%, widening the inverted differential between the two to widen to -70.41bps.

Euro – The euro lost by 0.36% to 1.033 due to the stronger dollar. Inflation in the Eurozone was revised slightly lower from the preliminary estimate of 10.7% y/y to 10.6% y/y. But the high inflation is still considered high from the ECB’s desired target of 2.0%, and ECB has emphasised that additional rate hikes would be needed to bring inflation to the desired level.

British pound – The pound gained by 0.22% to 1.189. Despite the gain, prospect is not looking great for 2023. During the tabling of the budget, the UK finance minister said that the UK economy is forecast to decline by -1.4% in 2023, further suggesting that recession is very likely to drag into next year.

Japanese yen – The yen weakened by 0.12% to 140.370 due to the stronger dollar. On macro, Japan’s inflation continued to rise, increasing from 3.0% in September to 3.7% in October. This will be the highest inflation reading since January 1991. Main impetus for the high inflation was higher imported prices due to persistent yen weakness, pushing food and fuel prices higher. On a monthly basis, inflation increased by 0.6% m/m (September: 0.3% m/m), the sharpest increase since April 2014. 

Despite the high inflation number, the BOJ governor has said that the central bank’s ultra-loose monetary policy will be maintained to support economic recovery.

Chinese yuan – The yuan gained by 0.53% to 7.120, as market was welcoming the news of gradual easing of the ZCP in China. On future economic prospect, a PBOC monetary policy member said that China urgently needs to push the economy to grow by at least 5.0% next year, to keep the economic growth on track before achieving the medium-developed country by 2035.

Korean won – The won weakened by 0.08% to 1,340.14.

Australian dollar – The Aussie dollar weakened by 0.18% to 0.667 due to stronger US dollar. Australia’s labour market continued to be tighter, where the latest unemployment rate dropped from 3.5% in September to 3.4% in October. Around 32,000 people were hired in October. The tightness in the labour market further suggests that the RBA will continue to increase the interest rates. The next RBA meeting will be on 6 December.

Commodities Highlights

Crude oil – Oil prices eased further last Friday, continuing the declining trend for the past two weeks due to weakening demand from China and slowing down of the global economy. Brent down by 2.41% to US$87.62 per barrel and WTI down by 1.91% to US$80.08 per barrel.

Gold – Gold price lost its momentum, declining by 0.55% to US$1,751/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit was trading between 4.5530 and 4.5535 and weakened by marginally by 0.01% to 4.553.  

Trade numbers came in stronger, where exports increased 15.0% y/y to RM131.6bn (September 22: 30.1%), which brings the total exports for the first 10-months of 2022 to RM1.29tn, the highest level on record.  

Imports grew faster as it expanded 29.2% y/y to RM113.5bn (September 2022: 32.8%), which translates to a total import of RM1.08tn over the same period.  

With the YTD exports now is at 26.4% y/y, we revise upwardly our export growth projection for 2022 to 25.5% - 26.5% (previous 24% - 25%) where the growth will be slower in 4Q22 due to high base and slowing global growth.  

We expect the MYR to trade between our support level of 4.550 and 4.560 while our resistance is pinned at 4.600 and 4.610. Focus on Malaysia will be in the formation of the next government.

KLSE – The KLCI was at 1,449, closed due to public holiday on Friday.

Rates – The IRS yield for the 3-year remained at 4.055%, 5-year at 4.145%, 7- year at 4.280%, and 10-year at 4.390%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.550 and 4.560 while our resistance is pinned at 4.600 and 4.610.

Source: AmInvest Research - 21 Nov 2022