• Yuan firms up as authorities ease Covid restrictions

Global Highlights

Dollar Index – The dollar index fell 0.45% to 105.10 as the labour productivity data beat expectation. The nonfarm labour productivity improved by 0.8% q/q, exceeding earlier predictions of 0.3% q/q, and rebounding from a 4.1% q/q drop in the previous quarter.

US equities & sovereign bonds – Wall Street was rather mixed as the Dow closed flat at 33,598, while S&P500 fell 0.19% to 3,934 and Nasdaq dropped 0.51% to 10,959.

The UST10Y benchmark yield lost 11.5bps to 3.417%, while the UST2Y lost 11.0bps to 4.256%, widening the inverted differentials to 83.9bps.

Euro – The weak dollar saw the euro appreciate by 0.37% to 1.051. On the data front, the Eurozone's 3Q22 GDP was revised upwardly to 0.3% q/q from 0.2% q/q, after an 0.8% q/q gains in the previous quarter. This will be the softest growth since 2Q21 (2.0% q/q) driven mainly by fixed investment and household consumption.

British pound – The pound climbed 0.58% to 1.220 due to weak dollar. On the data from, property sector is on the downtrend. For instance, the Halifax statistics showed a 4.7%y/y rise in house in Nov’22, from 8.2%y/y in October, the lowest since Jul’20. On monthly changes, it declined 2.3% m/m, down from 0.4% m/m contraction in the previous month.

Japanese yen – The yen strengthened 0.28% to 136.62 due to weak dollar. On the data front, as the economy recovered from Covid-related disruptions. The Reuters Tankan sentiment index for Japanese manufacturers rose to 8 in December 2022 from 2 in November.

Chinese yuan – The yuan strengthened 0.36% to 6.970, supported partly by the easing Covid rules in China plus weak dollar. Authorities loosened some of the restrictions as they said asymptomatic and mild symptoms cases can quarantine at home.

On the macro front, China's November trade surplus shrank from USD 71.7bn to USD 69.8bn, far below market estimates of USD 78.1bn, as global and domestic demand declined. Exports fell 8.7% y/y, worse than market forecasts of 3.5%, after a 0.3% drop a month before, due to rising prices and supply disruptions and weak demand. Amidst COVID-19 restrictions, imports plunged 10.6%, faster than market forecasts of 6.0%, after a 0.7% decline a month before.

Korean won – The won weakened 0.20% to 1,322. Sentiments surrounding the economy continue to sour as the national truckers’ strike entered its 14th day without any breakthrough in negotiations. The government mulled ordering truckers, especially those that serve the petrochemical and steel industries to return to work. According to the government, the first 12 days have delayed delivery of goods worth US$2.6bn.

Australian dollar – The Aussie dollar rose 0.55% to 0.673. After a 0.9% q/q gain in 2Q22, the economy grew 0.6% q/q in 3Q22, below market forecast of 0.7%, and 5.9% y/y on yearly changes, below market projections of 6.1% y/y. The economy increased for the fourth straight quarter, while household consumption rose the least in a year (1.1% vs 2.1% in Q2).

Commodities Highlights

Crude oil – Oil prices tumbled again as the US distillate stocks posted a gain of 6.2mil barrels, beating market forecast of 2.2mil barrels build-up. Brent dropped 2.75% to US$77 per barrel while WTI sank 3.02% to US$72 per barrel.

Gold – Gold rose 0.86% to US$ 1,786/oz.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened slightly by 0.03% to 4.398 and traded within the range of 4.4137 and 4.395.

On another note, the Malaysian Palm Oil Association cited the shortage of plantation workers may cost palm oil producers about RM20bn ($4.6 billion) this year. This can curb supplies of palm oil and potentially support prices.

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 closed lower by 0.32% to 1,467. Detailed transactions showed that local institutions and retailers were the net buyers with RM230.8mil and RM28.3mil, respectively, offset by foreign investors selling flow of RM259.1mil.

Fixed Income – Local bond market saw mixed movements as the 3-year +3.0bps to 3.650%, 5-year -0.5bps to 3.865%, 7-year remained at 3.985%, and 10-year +1.0bps to 4.070%.

Rates – The IRS yield for the 3-year -3.0bps to 3.665%, 5-year -2.5bps to 3.735%, 7-year -3.5bps to 3.850%, and 10-year -3.0ps to 3.960%.

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 - 8 Dec 2022