• Dollar Starts the Year on a Green Note

Global Highlights

Dollar Index – The greenback surged 0.96% to its highest level in two weeks at 104.52 ahead of the release of the latest US Fed minutes from the December meeting. We may see clearer monetary policy path throughout 2023, alongside with the signals of higher and longer terminal Fed Funds rate despite the signs of easing inflation and sluggish growth.

On the data front, the US S&P Manufacturing PMI dipped further into the contraction zone at 46.2 in Dec’22, the lowest level since May’20 as output and new orders plunged.

US equities & sovereign bonds – Wall Street traded in red during its first session of 2023 as the Dow Jones fell 0.03% to 33,136, S&P500 dropped 0.40% to 3,824 and Nasdaq shed 0.76% to 10,387.

The benchmark UST10Y lost 13.59bps to 3.739% while the UST2Y lost 5.59bps to 4.37%, widening the inverted differential between the two to -63.1bps.

Euro – As the dollar firmed, the euro fell 1.12% to 1.055 as the Germany’s inflation eased more than expected. Report showed that the country’s inflation rate for Dec’22 fell to 8.6% y/y, down from 10.0% y/y in the prior month and much less than market consensus of 9.1% y/y. This was mainly due to the one-off payment offered by the government to help households and SMEs cover their monthly gas and heat payments, which came into effect in Dec’22.

British pound – The pound was on the downside as well as it fell 0.65% to 1.197. The S&P/CIPS Manufacturing PMI for Dec’22 was revised higher to 45.3 from the preliminary of 44.7 (Nov’22: 46.5), pointing towards still-repressed manufacturing output in the UK.

Japanese yen – The yen weakened 0.17% to 130.02, its strongest level since Jun’22 as the sudden shift in the monetary policy has provided some supports for the currency.

Chinese yuan – The yuan depreciated 0.24% to 6.915. The Chinese Premier Xi Jinping stated that the local economy grew by at least 4.4% in 2022, almost inline compared to Bloomberg mean consensus of 4.8%. Amidst the surging Covid-19 cases, policymakers vowed for a rebound in 2023.

Korean won – The won closed stronger 0.11% to 1,271. The Bank of Korea’s governor stated that the central bank will work concurrently with the government to ensure a soft landing amidst rising interest rates and global economic uncertainties by focusing on growth, financial and foreign exchange market conditions. This is after having raised its interest rate by 275bps to 3.25% since Aug’21.

Australian Dollar – The Commodity-linked Aussie Dollar Sank 1.10% to 0.673.

Commodities Highlights

Crude oil – Oil prices edged lower as the outlook on China’s and global demand remained doubtful, in parallel with more expensive dollar. Brent fell 4.43% to US$82 per barrel and WTI also lost 4.1% at US$76 per barrel.

Gold – Gold gained 0.85% to US$1,839/oz, the highest level since Jun’22 supported by growth concerns among investors.

Malaysia Highlights

Malaysian ringgit – The ringgit lost 0.09% to 4.409 and traded within the range of 4.4093 and 4.3888.

KLSE – The KLCI closed tumbled 1.44% to 1,474. Detailed transaction showed that both local institution and local retails were net buyers with RM13.12mil and RM19.15mil positions. Meanwhile, foreign investors were the net sellers with RM32.27mil flow.

Fixed Income – The MGS 3y lost 6.0bps to 3.597%, 5y -8.0bps to 3.778%, 7y - 4.0bps to 3.962%, and 10y -3.0bps to 4.015%.

Rates – The IRS yield for the 3-year -6.7bps to 3.638%, 5-year -7.5bps to 3.700%, 7-year -4.5bps to 3.880%, and 10-year -11.5bps to 3.930%.

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

Ringgit Outlook for the Day

We expect the MYR to trade between our support level of 4.350 and 4.370 while our resistance is pinned at 4.450 and 4. 470

Source: AmInvest Research - 4 Jan 2023