• Dollar climbs further as investors anxious on economic prospect

Global Highlights

Dollar Index – The dollar index rose 0.26% to 105.56 as risk mode soured and the market mulling over how long the US Fed will keep its interest rate rising. On the data front, the US trade deficit widened to US$78.2bn for Oct’22 from US$74.1bn, driven by lower exports due to lower sales of petroleum products and pharmaceuticals.

US equities & sovereign bonds – Wall Street closed in the red for the second consecutive days as the Dow fell 1.03% to 33,596, S&P500 dropped 1.44% to 3,941, while Nasdaq fell 2.00% to 11,015.  

The UST10Y benchmark yield lost 4.7bps to 3.531%, while the UST2Y lost by 2.1bps to 4.366%, widening the inverted differentials to 83.5bps.

Euro – The euro dipped 0.23% to 1.047 as the dollar traded higher. The S&P Construction PMI in Eurozone dropped to 43.6, the lowest level since May 2020 when the pandemic started. The decline was led by housing and followed closely by civil engineering as marked contractions were seen in in activity levels and new orders amidst weakness in demand and cost of living crisis.

British pound – The pound fell 0.47% to 1.213. Despite the high inflation, retail sales in the UK further improved by 4.1% y/y in Nov’22 from 1.2% y/y in the prior months. But the healthy increase can be seen as seasonal as it was boosted by winter-related purchases and Black Friday season. However, the increase was driven by higher price as sales volume is still on the downside.

Japanese yen – The yen depreciated slightly by 0.18% to 137.00. Data showed that household spending rose 1.2% y/y in Oct’22 from 2.3% y/y (cons.: 1.0%) while real wages dropped 2.6% y/y, which marked the biggest decline in more than seven years after 1.3% y/y decline in Sept’22. With this, we do not expect the BoJ to alter its policy soon as the wage growth seems far being outpaced by inflation.

Chinese yuan – The yuan weakened by 0.47% to 6.995 after hitting below 7.0-level for the first time since mid Sept’22. On the pandemic front, some cities in China have already starting to ease their strict Zero-Covid policy and one of the officials mulls to downgrade Covid’s status – to be on par with HIV and viral hepatitis – which can help local governments to not introduce strong controls anymore.

Korean won – The won weakened sharply 2.09% to 1,320. As the truckers’ strike continued with no breakthrough so far, nearly 100 petrol stations across the country face the risk of running dry.

Australian dollar – The Aussie dollar fell slightly by 0.15% to 0.669 following the smaller rate hike made by the Reserve Bank of Australia. The central bank raised its cash rate by 25bps to 3.10%, the highest level since 2012.

Commodities Highlights

Crude oil – Oil prices tumbled to their lowest level since pre-Ukraine crisis as investors getting nervous on the economic outlook. Brent sank 4.03% to US$79 per barrel while WTI dropped 3.48% to US$74 per barrel.

Gold – Gold shed rose 0.1% to US$ 1,771/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened 0.62% to 4.396 and traded within the range of 4.3997 and 4.369. To address the shortage, the Agriculture and Food Security Mohamad Sabu said that Malaysia will temporarily import chicken eggs as a short-term solution before any long-term ones can be decided.  

For today, we expect the MYR to trade between our support level of 4.350 and 4.360 while our resistance is pinned at 4.400 and 4.410.

KLSE – The KLCI was relatively unchanged at 1,472. Detailed transactions showed that local institutions and retailers were the net buyers with RM75.8mil and RM14.6mil, respectively, offset by foreign investors selling flow of RM90.4mil.

Fixed Income – Local bond market tepid movements as holiday season approaches. The 7-year remained at 3.985%, while the 3-year -5.0bps to 3.620%. The 5-year +0.5bps to 3.870% and 10-year +2.0bps to 4.060%.

Rates – The IRS yield for the 3-year +1.5bps to 3.695%, 5-year +3.0bps to 3.760%, 7-year +3.5bps to 3.885%, and 10-year +1.0bps to 3.990%.

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

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 4.400 and 4.410.

Source: AmInvest Research - 7 Dec 2022