Snapshot Summary

Global FX: The dollar snapped its three-day bullish run

Global Rates: UST yields closed near the recent high hovering above 4.60% level

MYR Bonds: Local govvies continued to trade firm on Friday

USD/MYR: Ringgit started the year on a weaker footing as it fell 0.5% on Friday

Macro News

Global: Global FAO Food Price Index decreased by 0.5% m/m to 127 points in December, down from an upwardly revised 127.6 points in November. For the entirety of 2024, the index averaged 122 points, marking a 2.1% decrease from its 2023 value.

US: The ISM Manufacturing PMI rose by 0.9 points in December from the previous month to 49.3, exceeding market expectations of 48.4. This marked the mildest contraction in the US manufacturing sector since March, which had seen the only period of expansion 50.3 since September 2022.

Fixed Income

Global Bonds: US Treasuries closed with yields near recent highs and again testing above the 4.60% level. Release of firm US ISM manufacturing numbers affected sentiment but we think sentiment was also weak for bonds before upcoming US labour market data releases and continued UST auctions this week. The 10Y UST closed Friday at 4.60% and up 4 bps on the day and down 3 bps w/w.

MYR Government Bonds: Last Friday, the local government bond market continued to trade firm and we think sustained tone in UST trading aided sentiment onshore. Additionally, our traders think there was support from the recent announcement on mandatory foreign contribution into EPF which may inject additional inflows into the domestic bond market.

MYR Corporate Bonds: In the ringgit corporate bond market last Friday, we noted more flows as more traders returned to their desks from their year-end break. We noted net buying interest in higher-grade names and infrastructure-related AA names. However, there was some net selling pressure as well, led by such papers like UEM Sunrise 09/26 (AA-) (up 3 bps to 3.86%) and SP Setia 06/26 (AA flat) (up 9 bps to 3.84%).

Forex

US: The DXY retreated 0.4% on Friday, snapping its three days of bullish run as dovish remarks from Richmond Fed President Barkin and improved risk sentiment in equities outshone rising UST yields and a stronger-than-expected ISM manufacturing index. This week's focus will be on US labour market data, to gauge the upcoming Fed's decision.

Europe: The euro rose 0.4% despite broader headwinds from a weaker growth outlook, potential US tariffs, ECB rate cut expectations exceeding those for the Fed, and uncertainties around French and German politics, leading to a 1.1% weekly decline, the steepest since early November. The sterling meanwhile, climbed 0.3% on Friday.

Asia Pacific: The USD/JPY pair slipped below 157 last Friday as the dollar retreated. Focus this week will be on wage data due on Thursday. The USD/CNY surged to above 7.322 per dollar, despite the stronger-than-expected daily PBoC yuan fixing. This is in tandem with the falling CGB yields reaching the lowest in record as the government and central banks are expected to deploy more accommodative policies to prop up the economy.

Malaysia: The ringgit fell 0.5% on the day as it briefly dipped below the 4.50 per dollar level during the session. It posted 0.7% for weekly losses, starting off 2025 on weaker footing as global markets await more clarity on Trump's policy.

Other Markets

Gold: Gold fell 0.7% despite a weaker dollar and easing Treasury yields, as a lack of major US economic data left the precious metal without clear directional catalysts.

Oil: Brent crude rose 0.8% while WTI climbed 1.1%, supported by cold weather and China's stimulus measures aimed at boosting economic growth, alongside with declining US crude stockpiles.

Source: AmInvest Research - 6 Jan 2025