In line with our expectation, the US Fed held its benchmark interest rate target between 1.00% - 1.25% in the latest FOMC meeting and maintained its positive language on the current state of the economy. With the economy growing around 3% and unemployment at 4.2%, with very easy monetary conditions and a modest uptick in inflation expectations, everything leads to show the Fed will be raising rates in December.

Despite the efforts to tighten policy, economic conditions have remained loose and the stock market continues to rally. This seems to cause some concern on the lack of impact the Fed's moves and raised fear that delaying tightening could promote asset bubbles and financial instability. We expect the Fed to further tightening rates in 2018, projecting a 2-3 rate hikes.

We reiterate our 2017 full year USD/MYR average at 4.31 -33, with the intraday swing around 4.10-12 while our year-end projection at 4.12-15. For 2018, we project the USD/MYR at 4.205 with our year end period target at 3.95 and intraday swing 3.93-95.

• In line with our expectation, the US Fed held its benchmark interest rate target between 1.00% - 1.25% in the latest FOMC meeting. The Fed’s statement maintained its positive language on the current state of the economy.

• With the economy growing around 3% and unemployment at 4.2%, with very easy monetary conditions and a modest uptick in inflation expectations, everything leads to show the Fed will be raising rates in December. The Fed already has raised rates twice in 2017 as part of its steady normalization of monetary policy.

• In addition to the rate hikes, the Fed in October began the process of gradually reducing its $4.5trn balance sheet, which mostly contains bonds the Fed purchased to stimulate the economy by lowering mortgage rates and steering investors to risk assets like stocks and corporate bonds.

• Despite the efforts to tighten policy, economic conditions have remained loose and the stock market continues to rally. This seems to cause some concern on the lack of impact the Fed's moves and raised fear that delaying tightening could promote asset bubbles and financial instability. We expect the Fed to further tightening rates in 2018, projecting a 2-3 rate hikes.

• We reiterate our 2017 full year USD/MYR average at 4.31 -33, with the intraday swing around 4.10-12 while our year-end projection at 4.12-15. For 2018, we project the USD/MYR at 4.205 with our year end period target at 3.95 and intraday swing 3.93-95.

Source: AmInvest Research - 2 Nov 2017