• Dollar touches weakest level since June 2022

Global Highlights

Dollar Index – The dollar index ended the week on weaker note as it fell 0.17% to 104.54. n the data front, the US labour market remained healthy as the non-farm payrolls rose 263k jobs for Nov’22, higher than market consensus of 200k but lower than Oct’22 reading of 284k. It was the lowest job gains since Apr’21 dragged by the decline in employment among retailers. The US unemployment rate over the same month remained at 3.7% for the second straight months, suggesting the tightness of labour market.  

Despite the favourable data, the US Fed’s official Evans commented about toning down the pace of rate hike moving forward, which matches with our forecast of 50bps in Dec’22 to end the year at 4.50-4.25%.

US equities & sovereign bonds – Wall Street was mixed as the Dow Jones inched higher slightly by 0.10% to 34,430, S&P500 fell 0.12% to 4,072, while the Nasdaq fell 0.18% to 11,462.  

The UST10Y benchmark continued to be on the downside as it fell by 1.9bps to 3.486%, while the UST2Y rose by 4.4bps to 4.272%, widening the inverted differentials to 78.6bps.

Euro – The euro gained 0.14% to 1.054 as market dial down the expectations of the US Fed’s rate hike path. On the data front, Euro area’s producer inflation contracted 2.9% m/m, the largest on record and the first decline since May’20, due to the 6.9% slump in energy prices, in tandem with easing global oil prices. On annual changes, the same grew only 30.8% y/y, compared to forecast of 31.5%.

British pound – The pound climbed 0.27% to 1.228. Amidst a wave of strikes which were nudged by surging cost-of-living and recessionary economic environment, the government is looking to bring military intervention to mitigate the strikes and ensuring public services run smoothly.

Japanese yen – The yen strengthened 0.75% to 134.31, the strongest level in more than 3-months as the dollar retraced its months of gains.  

Japan’s final GDP for 3Q22 is expected to be released on Thursday (7 Dec), where the market is expecting the economy to decline by -0.3% q/q.

Chinese yuan – The yuan remained relatively unchanged at 7.054. On the pandemic front, China has softened its view on Covid rules as one of the officials in charge stated that the fight against the Covid-19 is entering new phases and eased some of the rules following the protests.

Korean won – The won weakened slightly by 0.06% to 1,300. Over the weekend, thousands of demonstrators organized march in South Korea’s capital as an effort to push the government to improve truckers’ working conditions and pay. This will have global implications as the country is a key supply chain hub for cars, chips, ships, monitors, and etc.

Australian dollar – The Aussie dollar fell 0.31% to 0.679. The retail sales in Australia contracted 0.2% m/m for Oct’22, after 0.6% growth in the prior month. This marked the first contraction this year as consumer spending outweighed by the high cost of living and elevated interest rate.  

The Reserve Bank of Australia (RBA) will be meeting tomorrow for its final policy meeting of the year. We are expecting RBA to hike its cash rate by smaller pace 25bps to 3.10%, in line with ours and market’s forecast.

Commodities Highlights

Crude oil – Despite the good news swamping global oil market as OPEC+ nations stick to their initial plans to cut output by 2mbpd from November 2022 through 2023 and China eased Covid-19 curbs, Brent price dropped 1.51% to US$85 per barrel while WTI dropped 1.53% to US$80 per barrel.

Gold – Gold gained by 1.96% to US$1,803/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit strengthened further by 0.42% to 4.388, marking the fourth consecutive days of strengthening trend and traded within range of 4.4063 and 4.3815.

The focus this week will be on the distributive trades where we are expecting a 19% - 21% annual growth rate for October 2022, after posting 23.9% y/y in September 2022. It will be driven mainly by retail trade and motor vehicles sales as well as low base support. We expect the MYR to trade between our support level of 4.350 and 4.360 while our resistance is pinned at 4.420 and 4.430.

KLSE – The KLCI closed lower by 0.65% to 1,482. Detailed transaction showed that local institutions were the net buyers with RM301.5mil positions, offset by the foreign investors and local retailers with RM292.7mil and RM8.8mil positions, respectively.

Fixed Income – Local bond market saw mixed movements as the 3-year yield -6.0bps to 3.672%, and 10-year -2.0bps to 4.037% while the 5-year remained at 3.887% and 7-year +2.0bps to 3.986%

Rates – The IRS yield for the 3-year -3.0bps to 3.740%, 5-year remained at 3.830%, 7-year -4.0bps to 3.910%, and 10-year -2.0bps to 4.030%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.350 and 4.360 while our resistance is pinned at 4.420 and 4.430.

Source: AmInvest Research - 5 Dec 2022