Snapshot Summary…

Global FX: The dollar falls on Friday despite the decline in the UST yields

Global Rates: US Treasuries posted gains on the back of Fed signalling three rate cuts this year

MYR Bonds: The local bond market closed flat after a strong rebound the day before

USD/MYR: The ringgit weakened to follow the yuan’s underperformance and in line with other emerging currencies' market

Macro News

Japan: In February 2024, Japan’s headline inflation advanced 2.8% y/y, faster than the previous reading of 2.2% y/y and the fastest growth since last November. The rise was mainly driven by a slower decrease in fuel, gas, and electricity prices as the base effects dissipated. The core rate, which includes fuel costs but excludes fresh food, reaccelerates to 2.8% y/y, the same as the market forecast and above BoJ’s target of 2.0% for 23 straight months.

United Kingdom: Retail sales volume in the UK was stagnant in February 2024 after the surge of 3.6% m/m in the previous month, though the market was looking at a 0.3% fall. The decline in food stores and fuel retailers offset the increase in clothing and department stores. If we exclude fuel sales, retail sales volume will grow slightly by 0.2% m/m. On an annual basis, the overall retail sales volume was down by 0.4% y/y.

Fixed Income

Global bonds: US Treasuries posted more gains on Friday and completed overall weekly gains, which was on the back of the Fed signalling three rate cuts this year. Elsewhere, Bund yields also fell, aided by central bank rate cut signal and last week’s release of mixed PMI numbers.

MYR Government Bonds: The local bond market closed flat after a strong rebound the day before. MGS interest changed little last Friday as the 10Y UST fell slightly, although the overall dollar strength remained resilient post-FOMC.

MYR Corporate Bonds: Ringgit credits continued to show interest on Friday, while sentiment was still aided by the outlook for lower global rates this year. Net buying interest was slanted on infra-related sectors and banking papers. These included 06/33 Gamuda (AA3) at 4.15% and 08/33 Duke 3 (AA-) at 4.86%. Meanwhile, 12/26 MAHB (AAA) was traded at 3.71%.

Forex

United States: While there was a lack of data direction in the US on Friday, recent strong US economic data support the dollar despite the fall in UST yields. The dollar rose 0.4%, receiving support from the dovish shifts by a series of central banks, including the BoE (no more policymakers voting for rate hikes) and the PBoC (weaker yuan fixing). Aside from that, Atlanta Fed President Raphael Bostic said he is now only looking at one rate cut happening this year, compared to twice the previous expected cuts.

Europe: The EUR fell 0.5%, though the common currency was modestly supported by the improvements in Germany’s business outlook data. At the same time, the GBP also fell against the stronger dollar after the BoE stance was tilted towards the dovish side post-policy meeting on Thursday.

Asia-Pacific: The Chinese yuan dipped 0.4% to its weakest level in four months at 7.229 after the PBoC fixed the daily yuan reference rate at above 7.10-level, the weakest fix since early March 2024. On the other hand, the Japanese yen steadied and firmed by 0.1% to close at 151.41 after Japan’s consumer price grew faster at 2.8% y/y, and its core CPI growth rate was at 2.8%, matching the market’s forecast.

Malaysia: The ringgit fell 0.4% to finish the week at 4.737 and traded within the range of 4.730 – 4.743. The fall can be attributed to the PBoC allowing the yuan to trade above 7.20, affecting other emerging currencies. The MSCI Emerging Currencies Index fell 0.4% on the day.

Other Markets

Gold: The price of precious metals fell 0.7% to USD2,165/oz after reaching a record high on Wednesday amidst the sustained strong dollar.

Crude oil: Crude oil prices dropped further amidst the possibility of a ceasefire in Middle East Geopolitical tension.

Source: AmInvest Research - 25 Mar 2024