Snapshot Summary…

Global FX: The dollar rebounded from an eight-month low

Global Rates: The UST curve trimmed its gains ahead of September rate cut

MYR Bonds: Local govvies moved slightly post-Jackson Hole meeting

USD/MYR: The ringgit strengthened against USD and other regional currencies

Macro News

United States: New orders for manufactured durable goods in the US jumped by 9.9% m/m in July 2024 compared to the previous month, recovering from a downwardly revised 6.9% decline earlier, marking the largest increase since May 2020 and surpassing market expectations of a 5% rise. This outcome counters the growing concerns about manufacturing activity in the US, suggesting that the current slowdown might be temporary. The increase was largely driven by a significant rise in transportation equipment orders, which climbed 4.8% to $102.2 billion.

Dallas Fed Manufacturing Index improved to -9.7 in August 2024, up from -17.5 the previous month, representing the lowest level of contraction since January 2023.

Fixed Income

Global Bonds: The UST curve erased some recent gains as market players mulled whether the Fed will take a 25 bps or 50 bps rate cut during the upcoming September meeting. The UST yields were also lifted by the better-than-expected US durable goods data released last night.

MYR Government Bonds: The local bond market little moved post-Jackson Hole as the dovish tone from the Fed Chair was widely anticipated, while market players seemed to be throwing focus back onto upcoming PCE Price Index data this Friday to judge how aggressively the Fed will cut its interest rates.

MYR Corporate Bonds: Flows in the PDS space were also relatively muted at MYR484 million, but we saw traders still buying high-quality papers, especially among infrastructure, highways, and energy names. Among notable trades were MYR40 million on Pengurusan Air SPV 06/25, done at 3.285%, MYR20 million on Putrajaya Holdings 04/25 (AAA), done at 3.556%, and MYR4 million on Leader Energy 07/27 (AA-) done at 4.436%.

Forex

United States: The dollar firmed and rebounded from the eight-month low, propelled by the safe-haven demand amidst escalating Middle East geopolitical tension. In addition, solid figures on US durable goods orders (9.9% m/m vs. 5.0% m/m consensus) may have also supported the dollar.

Europe: The EUR could not find a lift and found itself down towards the 1.116 level amid the late-session USD strength. The EUR was not helped by expectations of anECB rate cut next month, even as the dovish Fed pressured the USD. The UK was on a bank holiday, and the lack of liquidity tempered the GBP movement.

Asia Pacific: The CNY held gains yesterday following fresh dovish signals last Friday. News reports indicate that PBoC injected liquidity amounting to CNY300 billion via 1Y MLF, and there was some cautious sentiment for the CNY ahead of PMI prints this week. Meanwhile, there was late USD support on safe-haven demand due to the bombing in Lebanon, which also aided the JPY and saw USD/JPY ending flat. The geopolitical risks also pressured the AUD as it slightly backed down from the 0.680 level.

Malaysia: The ringgit strengthened amid the weaker dollar, and the Malaysian currency also gained against regional currencies. Expectations of inflows into the ringgit have increased vis-a-vis the region, as we think Malaysia has been way off the radar of foreign investors in the past year until recently.

Other Markets

Gold: The price of gold was supported by safe-haven demand amid the possible escalation in the Middle East. It rose 0.2% to USD2,518 per oz overnight.

Crude oil: Oil prices rose amid the Middle East geopolitical concerns. WTI and Brent rose by 2.1% and 3.0% to USD77.42 and USD81.43 per barrel respectively.

Source: AmInvest Research - 27 Aug 2024