Snapshot Summary

Global FX: Dollar set for the fourth consecutive week of gains

Global Rates: UST maintained their higher yield levels

MYR Bonds: Local govvies encountered losses as UST remained above 4.20%

USD/MYR: Ringgit declined in tandem with other Asian currencies

Macro News

Singapore: Singapore's annual inflation rate decreased to 2.0% in September, down from 2.2% the previous month. This marks the lowest level since March 2021, although it was slightly above market expectations of 1.9%. The annual core inflation rate rose to a three-month high of 2.8%, exceeding both forecasts and the August figure of 2.7%.

US: Existing home sales in the US decreased by 1% m/m in September. This marks the lowest level since October 2010, following an upwardly revised figure of 3.88 million in August and falling short of the anticipated 3.9 million.

Fixed Income

Global Bonds: US Treasuries maintained their higher yield levels overnight. Rising expectations of a Trump presidential win weakened Treasuries, as expectations of more tariffs and tax cuts instilled inflationary concerns. Data overnight showing US existing home sales down to a near 15-year low did little to boost UST.

MYR Government Bonds: The losses in the local bond market continued as UST yields remained high above 4.20%. Meanwhile, players will continue to pay close attention to Fed officials' comments in the short term and several important economic releases such as the Bank of Canada interest rate decision, US jobless claim and PMI data to assess the upcoming trading sentiment.

MYR Corporate Bonds: The corporate bond market also weakened further, but flows were light. Notable trades include AAA Danga 02/26, which increased 1 bps to 3.62%, and AAA rated SEB 07/33, which rose 4 bps to 3.99%.

Forex

US: The dollar rose for the 15th session out of the past 18 sessions and set the fourth consecutive week of gains. The Fed's "Beige Book," published on Wednesday, noted that economic activity was largely unchanged from September to early October, while businesses experienced a modest rise in hiring. These developments have strengthened expectations for a smaller 25 bps rate cut at the November meeting.

Europe: The euro fell by 0.2% after mixed comments from ECB officials. ECB chief economist Philip Lane noted that recent weak economic data in the eurozone has cast doubts on the region's outlook, but the ECB remains confident in the recovery's progress. Meanwhile, ECB President Christine Lagarde stated on Wednesday that the central bank must exercise caution when considering further interest rate cuts, basing decisions on incoming data. In the meantime, the GBP was down 0.5%.

Asia Pacific: Most Asian currencies were also on the downside as the global narrative remained in favour of dollar bulls, with the JPY falling to its lowest level since July, ahead of the snap election on Sunday, 27 October. The yuan weakened by 0.1% in China, slowly grinding towards 7.15 yuan per dollar-the latest easing measures announced by the PBoC risk also pressured the yuan.

Malaysia: Ringgit dropped to its lowest level in over a month, with the fall in other Asian currencies. On the domestic front, the inflation number for September will be released today. The market expects another tepid print of 1.9% y/y, but we posit that the ringgit's direction continues to be directed by external factors.

Other Markets

Gold: Gold retreated from a record high on Wednesday as the dollar climbed to its highest level in nearly three months, alongside rising Treasury yields. The precious metal was closed at USD2,716/oz.

Oil: Crude oil ended the day lower, trimming gains from previous sessions, following a report indicating a larger-than-expected increase in US inventories last week and a stronger dollar. The EIA's weekly report revealed that US oil inventories rose by 5.5 million barrels, significantly exceeding the forecasted increase of 270k barrels.

Palm Oil: Palm oil prices have reached their highest since 2022. Concerns over incoming production have boosted the commodity recently, especially due to aging trees in major producers Indonesia and Malaysia where planters have been reluctant to cut and replant as they are not keen to wait several years for new trees to mature.

Source: AmInvest Research - 24 Oct 2024