Snapshot Summary

Global FX: The dollar surged to a one-year high on October's inflation data and optimism over Trump-era policies

Global Rates: US Treasury yields traded mixed as US CPI data was in line with expectations

MYR Bonds: Traders remained cautious ahead of US CPI data as UST yields sustained higher during Asian session

USD/MYR: Ringgit continues to be cautiously traded as it weakened to the 4.447 level

Macro News

Japan: Japan's PPI rose by 3.4% y/y in October, surpassing the upwardly revised 3.1% increase from the previous month and exceeding market expectations of 3.0%. This marks the 44th consecutive month of producer inflation and is the highest rate recorded since August 2023.

US: The US annual inflation rate rose to 2.6% in October, up from 2.4% in September, the lowest rate since February 2021. This increase aligns with market expectations and represents the first rise in inflation in seven months. Meanwhile, core inflation recorded 0% growth at 3.3%, as anticipated. On a monthly basis, the CPI increased by 0.2%, consistent with the previous three months and in line with forecasts.

Fixed Income

Global Bonds: US Treasury yields were mixed. Longer maturities saw yields move higher, but shorter tenors edged slightly lower. The mixed closed was due to a mixed reaction to the US CPI data release, although it aligned with expectations. Longer tenor bonds in Europe rose slightly in yield after the US CPI data release and coming ahead of the Eurozone flash GDP data this week.

MYR Government Bonds: The Malaysian government bond market remained weak yesterday. The sentiment was guarded ahead of the US CPI data release after hours, with players noting that UST yields were sustained higher during the Asian session.

MYR Corporate Bonds: Corporate bond trading was more active, with various names traded. However, yield movements were mostly upwards, suggesting sentiment was weak, alongside the continued weakness in global bond markets. Heavier trades included AAA-rated PASB 01/30, which rose 8 bps to 3.91% on MYR40 million volume, and AAA-rated CIMB IMTN 07/35, which rose 10 bps to close at 4.13% also on MYR40 million volume.

Forex

US: The US dollar hit a one-year high, driven by in-line October inflation data and optimism over inflationary policies under Trump's administration. This is despite the lower UST 2Y yields as markets become more convinced of an incoming rate cut in the December meeting. The probability price increased to 82.5% from 58.7% in the day prior. Some hawkish remarks by Fed officials (Dallas Fed Logan and Kansas City Schmid) may have also supported the dollar.

Europe: The euro dropped below the 2024 low, now hovering around the Oct 2023 low of 1.05-level. While possible tariffs could hurt the European economies, Germany's political disarray also put pressure on the common currency. The GBP also dipped to its lowest level since August 2024.

Asia Pacific: The USD/JPY pair shot up again and breached the 155 level. Japan's producer inflation went up to 3.4% y/y, the highest level since August 2023, putting pressure on the BoJ to raise its interest rates further. The Chinese yuan broke its three straight days of bearish run as it firmed slightly to the 7.234 level due to reported stronger-than-expected midpoint guidance from Chinese authorities amid concerns over its recent rapid depreciation.

Malaysia: The ringgit weakened as traders wait for US CPI data after market hours. We think the currency will continue to be cautiously traded ahead of Malaysia's GDP print tomorrow.

Other Markets

Gold: Gold prices fell for a fourth consecutive session, dropping to USD2,573/oz, as the rising dollar overshadowed in-line US inflation data for October.

Oil: WTI crude rose slightly to USD68.43 per barrel, as weak Chinese demand and OPEC's downgraded demand forecasts weighed on the market, while Brent crude edged up to USD72.28 per barrel.

Source: AmInvest Research - 14 Nov 2024