Snapshot Summary

Global FX: The dollar remained steady but finding resistance below 108.50

Global Rates: US Treasury yields remained elevated as players continue to respond to Fed's rate cut signals

MYR Bonds: Ringgit government bonds were lacking in interest ahead of the year end

USD/MYR: The MYR was firm as the dollar was backing down from recent highs

Macro News

Malaysia: Malaysia's PPI decreased by 0.4% y/y in November, following a 2.4% decline in October. This marks the third consecutive month of producer deflation, although at a slower pace.

China: The People's Bank of China (PBoC) injected CNY300 billion into financial institutions on December 25 through a one-year medium-term lending facility (MLF) at an unchanged rate of 2.0%. This was in contrast to CNY1.45 trillion of MLF loans maturing this month, resulting in a net cash withdrawal of CNY1.15 trillion, the largest since 2014. This marked the third consecutive month with a steady MLF rate following a record 30 bps reduction in September.

US: US Richmond Fed Manufacturing Index increased to -10 in December from -14 in November, indicating a slight improvement. Among its components, shipments and employment remained stable, while new orders improved from -19 to -11.

Fixed Income

Global Bonds: The US Treasury market was modestly supported after the 5Y UST sale but yields remained elevated on a weekly basis post last week's FOMC meeting and 'hawkish' rate cut. The 5Y UST auction worth USD70 billion garnered a firm 2.40x BTC at a high yield of 4.478%.

MYR Government Bonds: The ringgit government bond market was thinly traded as market participants were either away from their desks ahead of the year end or were already closing their books for the year. Yields were down slightly but this occurred on very light volumes.

MYR Corporate Bonds: Trading interest in the PDS market was mixed to weaker ahead of the Christmas break. Various names appeared on the traded list led by papers such as AAA rated PLUS 01/29 which rose 15 bps to 3.89% A-rated MBSB 12/31 which closed unchanged at 4.06%.

Forex

US: The dollar remained supported ahead of the Christmas break as sentiment for the greenback remained aided by the prospects for slower-than-expected Fed rate cut next year. Nevertheless, last week's softer-than-expected PCE inflation data and the US government averting a shutdown pared the dollar gains.

Europe: The light trading session during Christmas eve favoured the dollar and pressured other currencies including the EUR and GBP. Sentiments surrounding the GBP continue to be on the downside following Monday's data showing UK's economy stagnated during 3Q2024, further putting dilemma for the BoE in maintaining its policy rate.

Asia Pacific: Most Asian currencies remained weak so far this week, against the strong USD. The CNY weakness was also sustained amid China's growth worries though expectations remained for additional fresh stimulus. On the other hand, expectations of easier monetary policy continue to pressure China's currency. The JPY is starting this morning on firmer ground though is weaker from a week ago. Data this week being awaited is the Tokyo CPI which is anticipated to show a higher 2.9% y/y in November versus 2.6% in October though expectations is also for BoJ to remain patient before its next rate hike. The AUD fell as the RBA minutes highlighted a cautious stance, emphasizing that current policies remain restrictive to address inflation risks, while acknowledging easing inflation trends.

Malaysia: The MYR was receiving some support below the 4.450 level this week, partly as the DXY level was finding resistance below 108.50. We think short-term moves are mainly technical amid a lack of major drivers.

Other Markets

Gold: Gold remained supported amid outlook for Fed rate policy path next year though firm USD are pressuring a cautious gold direction for the time being.

Oil: Oil prices were supported amid a lack of short-term drivers. Sentiment was driven by expectations of longer-term expectations such as China providing more stimulus to drive its economy, Trump push for the US economy and prospects of continued OPEC+ output cuts.

Source: AmInvest Research - 26 Dec 2024