Snapshot Summary

Global FX: The dollar struggled to extend further gains amid uncertainty over Trump's tariff threats

Global Rates: UST yields moved slightly higher overnight as players await more Trump policy announcements

MYR Bonds: Local govvies continues to see support as UST yields neared weekly lows

USD/MYR: The ringgit surged to around six-week high after the OPR remained unchanged at 3.00%

Macro News

Malaysia: The Bank Negara Malaysia (BNM) maintained its key interest rate at 3% for the tenth consecutive meeting, aligning with market expectations. The board continued to support economic growth, consistent with the current assessment of inflation and growth prospects. The decision mirrors our assessment in our "BNM January 2025 MPC Meeting" report as we believe that BNM will maintain the OPR as long as the labour market conditions, and inflation levels are manageable and stable.

Malaysia's annual inflation rate was 1.7% in December 2024, slightly below market expectations and November's rate of 1.8%. This represents the lowest rate since January.

Fixed Income

Global Bonds: UST yields moved slightly higher overnight as players await more news of more Trump policy announcements. News that Trump is implying only 10% additional tariffs on China supported global market sentiment but his suggestion of 25% tariffs on Mexico and Canada as well his stance for stricter immigration policy worried markets over higher inflation.

MYR Government Bonds: The onshore government bond market continued to see supports. UST yields seen near weekly lows provided impetus for the firm local MGS and GII papers. However, we think there was some caution ahead of the 3Y GII auction this week where tender size is a large MYR5.5 billion.

MYR Corporate Bonds: The local corporate bond market was mixed yesterday, and we noted mixed yield movements along select AAA names. Of these, a couple of PLUS 2029 maturities closed mixed to realign at 3.88%.

Forex

US: The dollar struggled to extend further gains after dipping to a two-week low, as traders focused on Trump's looming but still vague tariff threats for 1st February. With no further details from the White House, the market pared back its dollar positions and waiting for the next impetus. On geopolitical front, President Trump threatened to impose more sanctions on Russia if the country does not make a deal to end war with Ukraine.

Europe: The euro slipped after key ECB voices all but confirmed another rate cut is locked and loaded for next week-even if the Fed stays cautious. With President Lagarde and several heavyweights echoing support for more easing, traders are ramping up bets on further policy action in 2025. Markets currently see a 96% chance of at least a quarter-point trim, which supports the euro bears camp. Sterling dipped as well after December's bigger-than-forecast deficit-fuelled by mounting debt costs and a military-housing purchase-highlighted growing fiscal strain on finance minister Rachel Reeves.

Asia Pacific: Ahead of BoJ's meeting tomorrow with market pricing for 88.3% chance of a rate hike, the JPY pared some of prior session's gains to end lower at 156.53. The CNY weakened slightly as traders took profit after it firmed sharply to its highest level in more than three weeks. Before market opens, the PBoC set the daily yuan fixing at 7.1696, the strongest level since 8th November.

Malaysia: The ringgit surged 0.9%, hovering around a six-week high, after Bank Negara kept rates steady and noted manageable inflation ahead. Malaysia's overnight policy rate (OPR) remains unchanged at 3.00% for the 10th consecutive meeting, or 21 months, with unchanged interest rates. Malaysia's central bank is optimistic about the ringgit, citing external factors and narrowing interest rate differentials as beneficial despite potential market volatility.

Other Markets

Gold: Gold pushed to its highest level since November, buoyed by signs of a stalling dollar rally despite an uptick in Treasury yields.

Oil: Both Brent and WTI are currently on losing streak as Trump's tariff threats against major trading partners rattled markets with fears of a global slowdown.

Source: AmInvest Research - 23 Jan 2025