• Dollar comes out stronger across the board as risk averse rises

Global Highlights

Dollar Index – The dollar index continued its rally for the third back-to-back sessions as it rose 0.85% to 107.83. Allure for the safe haven dollar was spurred by the developments of China’s Covid outbreak. Authorities tightened rules by shutting businesses and schools as rising new cases and new deaths were reported. Focus this week for the dollar will be on FOMC minutes meeting and a batch of economic data including new home sales and durable goods order.

US equities & sovereign bonds – Wall Street was closed in the red across the board as the Dow Jones dropped 0.13% to 33,700, S&P500 fell 0.39% to 3,950 and Nasdaq shed 1.09% to 11,025.  

The benchmark UST10Y yield lost 0.2bps to 3.827% and the UST2Y added 1.9bps to 4.552%, widening the inverted differential between the two to 72.5bps.

Euro – Due to the higher dollar, the euro dipped 0.80% to 1.024, moving away from the recent four months peak.

British pound – The pound was on the downside as well as it shed 0.56% to 1.18. According to a study, UK restaurants are going bankrupt faster than it was during the Covid era. Due to the deadly mix of high costs, labour shortages and declining orders, insolvencies in the sector rose 60% to 1,567 in 2021-22 compared to 984 in 2020-21.

Japanese yen – The yen weakened 1.26% to 142.14, being pressured by the widening interest rates gap between the US Fed and the BoJ, and the weak economic prospect as the economy unexpectedly declined by 1.2%, the first contraction in four quarters.

Chinese yuan – The yuan weakened 0.64% to 7.165 following the rising of new Covid cases and new deaths which could nudge authorities to impose wider and stricter Covid rules. With the ZCP intact, downside risk to the economy remains high as consumer confidence remains weak plus the worry over property crisis.

Korean won – The won depreciated 1.12% to 1,355. South Korea government is watching over the short-term money market and is prepared to introduce measures to ease the financial strains in the market.

Australian dollar – The Aussie dollar dropped 1.02% to 0.661, tumbling away from the two months high as Australia’s trading partner China is being battered by the Covid outbreak.

Commodities Highlights

Crude oil – Oil prices closed lower after Saudi Arabia denied OPEC+ report stating that there are possibilities for the cartel and its allies to increase oil supply. Brent lost 0.19% to US$87 per barrel while WTI fell 0.44% to US$79 per barrel.

Gold – Gold price lost its ground for the fifth consecutive days as it fell 0.72% to US$1,7328/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit depreciated 0.61% to 4.581 and traded within the range of 4.5872 and 4.5535. Eyes will be on the political front amidst hung parliament.  

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.

KLSE – The KLCI fell 0.09% to 1,448. Detailed transactions showed that the local retailers were the net buyers with RM189.4mil, being offset by the net selling flow of RM21.7mil and RM167.7mil by local institutions and foreign investors, respectively.

Fixed income – Local bond market saw weaker prices amidst razor thin trading volume as the 3-year +8.0bps to 3.900%, 5-year +9.0bps to 4.280%, 7-year +4.0bps to 4.320% and 10-year +8.0bps to 4.400%.

Rates – The IRS yield for the (3Y) +2.0bps to 4.075%, (5Y) +3.5bps to 4.180%, (7Y) +6.0bps to 4.340%, and (10Y) +6.5bps to 4.455%.

Against major currencies – The ringgit was stronger against the EUR, GBP, AUD, JPY, CNY, SGD, and THB, but weaker against the IDR, 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 - 22 Nov 2022