❖ Risk appetite recovers on upbeat labour data
❖ MYR to fluctuate in the range of 4.2072 and 4.2295 against US dollar
Global Highlights
The Dollar index rose significantly by 0.60% to 92.800, driven by strong labour data, possibly nudging the Fed to tighten earlier
than expected.
Data showed that as much as 943K non-farm jobs were created in the US economy during the month of July, above marketexpectations of 870K, and driven by hiring in leisure and hospitality sectors as businesses ramping up hiring to meet the pentup demand (June: 938K).
Also, the unemployment rate fell to 5.4% in July from 5.9% in June, the lowest level since March 2020 (cons. 5.9%) while wage growth grew 0.4% m/m in July (cons: 0.4%; June: 0.3% m/m) and participation rate rose a tad higher to 61.7% (June: 61.6%).
The July labour market data reaffirms ‘substantial progress’ in the US economy and this will pave way for the Fed to kick start taper programme in 4Q2021. If that happens, it comes ahead of our base case where we expect tapering to start in early 2022, but falls into our best case of tapering to kick start in 4Q21.
Equities closed at record-level when S&P500 gained 0.17% to 4,437 and Dow Jones increased 0.41% to 35,209, also supported by the strong labour data.The strong sentiment has also sent the rising yield of 10Y UST bond higher by +7.34bps to 1.297%, highest since mid-July. Gold was under selling pressure as it shed 2.29% to US$1,763/oz.
Tracking stronger dollar, the euro fell 0.61% to 1.176, reversing its gains since end of July and touching its lowest point since April 2021.
The British pound lost 0.42% to 1.387 due to stronger dollar albeit the downside was cushioned by the hawkish undertone by BoE during last Thursday’s meeting and positive housing data released. House prices in the UK grew 0.4% m/m in July from a 0.6% decline in June prompted by the stamp duty holiday during the month.
Similarly, the Japanese yen shed 0.44% to 110.25 as investors are back seeking the risky assets. Among local data, the household spending declined 5.1% y/y in June after recording an increase of 11.6% y/y in May as the spending deteriorated due to the Delta variant outbreak. However, the leading and coincident index made positive reading despite new daily Covid cases reached record high around 15K recently.
In the meantime, the Chinese yuan depreciated 0.33% to 6.483 amid increasing daily Covid cases breaching 120 in China, the highest since January.
Crude oil was on the red again due to worries of rising Covid cases both in China and US, weighing on the demand prospect and emerged crisis in the Middle East. Brent fell 0.83% to US$70.70 per barrel while WTI decreased 1.17% to US$68.28 per barrel.
Malaysia Highlights:
The MYR weakened by 0.06% to 4.219, moving in-tandem with its Asia ex-Japan peers. It traded between a high and low of 4.223 and 4.214, respectively. The KLCI market slipped 0.40% to 1,490. Meanwhile, KLCI’s transaction by investors showed foreign investors sold a net position of RM133.8mil. Local institution and retailers held on to a net buyers’ position at RM65.4mil and RM68.4mil, respectively.
The local bond market saw selective buying with the 3-, 5-, and 7-year MGS fell 2.5bps to 2.305%, 1.5bps to 2.645%, and 1.0bps to 3.020%, respectively. The 10-year MGS rose 1.5bps to 3.210%.
The IRS curve climbed higher; (3Y) 1.5bps to 2.325%, (5Y) 3.0bps to 2.590%, (7Y) 1.0bps to 2.835%, and (10Y) 3.0bps to 3.030%. Elsewhere, KLIBOR remain unchanged at 1.940%
Against major currencies, the MYR appreciated almost across the board, up 0.18% to 4.981 vs. the EUR, 0.27% to 1.537 vs. the CNY, 0.12% to 3.118 vs. the AUD, and 0.44% to 3.827 vs. the JPY. However, the ringgit weakened by 0.04% to 5.870 vs. the GBP. Similarly, the ringgit strengthened against majority of its Asean peers, up against (THB) 0.48% to 7.925, (IDR) 0.27% to 3,404, and (PHP) 0.27% to 11.95, and (SGD) 0.01% to 3.121. The ringgit depreciated by 0.15% to 5,436 against the VND.
MYR Outlook For The Day
We expect the MYR to trade between our support levels of 4.2010 and 4.2072 while our resistance is pinned at 4.2295 and
4.2396.
Today’s Event
Key Financial Market Movement
Key Daily FX Charts
AmBank Research
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