• Dollar Trades Higher While Wall Street Closes in the Red

Global Highlights

Dollar Index – The dollar inched higher by 0.02% to 104.72, but still near the four months low it dipped last week. The NAHB housing market index are showing the effects of high interest rate and taking tolls on the homebuilders’ confidence. The index fell to 31 for Dec’22, the lowest level since pandemic and since 2012, worse than market expectation of 34.

US equities & sovereign bonds – Wall Street closed lower again as the Dow Jones edged lower by 0.49% to 32,758, S&P500 tumbled 0.90% to 3,818 while Nasdaq sank 1.49% to 10,546.

The UST10Y added 10.2bps to 3.585%, while the UST2Y added 7.7bps to 4.256%, narrowing the inverted differentials to 67.1bps.

Euro – The euro gained 0.20% to 1.061, supported by upbeat Germany’s business confidence. The Ifo Business Climate climbed to 88.6 in Dec’22, marking the third months of back-to-back gains and the best reading since Aug’22. It also beat market expectations of 87.4. This is despite the ongoing energy crisis and high inflation.

British pound – The pound rose marginally by 0.01% to 1.215. The Confederation of British Industry’s order book balance fell to -6 in Dec’22 from -5, the weakest level since Aug’22. The reading suggest that the data is still below normal level, pressured by the slump in global economy and surging inflation.

Japanese yen – The yen weakened 0.23% to 0.670. Over the weekend, the PM Kishida may revise a decade-old accord with the BoJ and mulling on to add some flexibility to achieve the 2% inflation target. This could provide an early signal of the ending of BoJ’s ultra-dovish stance.

Chinese yuan – The yuan weakened as well by 0.08% to 6.980. Despite the easing Covid rules, investors remained concerned on the uptick of Covid-19 cases. Reports are showing that supply chain movement are being pressured due to people calling in sick, resulting to late deliveries. And to shore up the economy, authorities vowed to deploy measures to support the economy, which in turn may pressure the currency due to the widening divergence of monetary policy stance.

Korean Won – The Won Strengthened 0.38% to 1,303.

Australian dollar – The Aussie dollar climbed 0.22% to 0.670. While China’s good news could provide some support for the currency, but the imminent global slowdown is pressuring it.

Commodities Highlights

Crude oil – Oil prices traded in green on the back of China’s reopening prospect. Brent climbed 0.96% to US$79 per barrel while WTI surged 1.21% to US$75 per barrel.

Gold – Gold Fell 0.30% to US$1,787/oz Due to Higher Yields Expectations.

Malaysia Highlights

Malaysian ringgit – The ringgit weakened slightly by 0.07% to 4.428 and traded within the range of 4.4275 and 4.4172.

The newly appointed PM Anwar has won the vote of confidence in the Dewan Rakyat, cementing his power after years of political noises.

We expect the MYR to trade between our support level of 4.390 and 4.400 while our resistance level is pinned at 4.440 and 4.450.

KLSE – The KLCI traded lower as it fell 0.10% to 1,477. Detailed transactions showed that the local institutions were the net buyers with RM61.1mil, offset by the net selling flow from foreign investors with RM61.1mil and by local retailers with RM0.07mil.

Fixed Income – Local bond market little to no actions as the 3-year benchmark yield remained at 3.690%, 5-year at 3.810%, 7-year at 4.020%, and 10-year at 4.030%.

Rates – The IRS yield for the (3Y) -1.0bps to 3.585%, (5Y) +0.3bps to 3.655%, (7Y) +0.7bps to 3.780%, and (10Y) +0.8bps to 3.880%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.390 and 4.400 while our resistance level is pinned at 4.440 and 4.450.

Source: AmInvest Research - 20 Dec 2022