Snapshot Summary

Global FX: Dollar closes lower amid tight trading range during festive season

Global Rates: US Treasuries hit seven-month highs amid inflation fears and slow rate cut expectations

MYR Bonds: MGS closed mixed within a narrow range on lack of trading interest

USD/MYR: Ringgit recovers amid positive economic prospects despite early losses

Macro News

Singapore: Singapore's PPI fell by 3% y/y in November, marking the fourth consecutive month of decline. However, this decline was less severe than the downwardly revised 5.1% drop in the previous month.

Japan: Retail sales in Japan increased by 2.8% y/y in November, up from a downwardly revised 1.3% rise in October, significantly surpassing market expectations of a 1.7% gain. This marked the 32nd consecutive month of retail sales growth and the fastest pace since August, supported by rising wages that continue to boost consumption.

Fixed Income

Global Bonds: The US Treasuries remained affected by expectations of slow rate cuts and rising inflation fears ahead of the Trump presidency. Yields moved higher by around 5 bps on the medium tenors Friday and is now at seven-month highs. There was muted reaction to data showing US retailers' inventories ticking higher by 0.3% on Friday. In the week ahead, incoming macro data include pending home sales for November and the S&P Case Shiller house price index.

MYR Government Bonds: Benchmark ringgit government bonds closed mixed within a narrow range last Friday as trading interest remained muted amid the year-end period. We noted the 3Y MGS closed 2 bps higher at 3.50% on decent MYR123 million volume and the 10Y GII inching 1 bp lower to close at 3.83% on MYR170 million volume but other benchmarks lacked much trading interest.

MYR Corporate Bonds: Similarly in the ringgit corporate bond market, trading interest was also lacking. Amid the thin market, we noticed some bids on GG papers, such as Danainfra 04/33 which was dealt 3 bps lower to 3.92% on MYR40 million volume and Danainfra 11/40 which fell 1 bps to close at 4.03% on just MYR10 million volume.

Forex

US: The dollar closed in red at around 108.00 but trading range was tight amidst seasonal festivities.

Europe: The EUR was steady, closing Friday at around 1.043 while the GBP rose 0.4%. The differences in Friday's performance could be attributed by the interest rate outlook differential between the ECB and the BoE where the latter is expected to take more measured pace in lowering them due to still sticky core inflation.

Asia Pacific: The JPY bounced off a five-month low against the dollar, fuelled by hints of a potential BoJ rate hike and a reduction in monthly bond purchases, as signalled by the summary of opinion from latest BoJ meeting. Traders are on the lookout for potential yen intervention amidst Japan's finance minister repeated warnings of readiness to prop up the currency against excessive weakness. The CNY ended last week near 13-months low, hovering just below the 7.30 per dollar level. The PBoC set the yuan's midpoint rate at 7.1893 per dollar, much stronger than expected at 7.2981 and previous fix of 7.1897 in another sign of not letting the yuan to slide.

Malaysia: The ringgit trimmed its early losses as the prospects for ringgit remained decent. While the weakness in yuan and cautious sentiment surrounding Trump's tariff policies would weigh on the ringgit, Malaysia's still healthy growth outlook and BNM standing still while global central banks already easing provide some allure for the ringgit. As of now, the ringgit is the only regional currency that is set to end the year higher. Nonetheless, the ringgit this week is expected to feel some turbulence as global markets continue to assess Fed's rate cut path in 2025. But the thin trading volume running up to New Year holiday would subdue markets and can leave ringgit trading in tight ranges.

Other Markets

Gold: Gold was down 0.5% and set for a 0.1% weekly loss as rising US Treasury yields and reduced expectations for near-term Fed rate cuts weigh on the metal's appeal.

Oil: Brent and WTI prices rose by 1.2% and 1.4%, respectively as markets digested a 4.2 million barrel drop in US crude inventories, compared with market

Source: AmInvest Research - 30 Dec 2024