Snapshot Summary

Global FX: DXY extends gains while AUD fell as RBA holds policy rate

Global Rates: US Treasuries seen in cautious trading ahead of US inflation data

MYR Bonds: Onshore market continued to see profit-taking activity

USD/MYR: MYR grinds lower but in a tight range

Macro News

Australia: The Reserve Bank of Australia (RBA) held its cash rate steady at 4.35% during its final meeting of 2024, marking the ninth consecutive time borrowing costs have remained unchanged, as anticipated by the market. The central bank noted that although headline inflation has significantly decreased and is expected to stay low for a while, core inflation remains too high and is not projected to reach the 2-3% target range until 2026.

Malaysia: Malaysia's industrial production grew by 2.1% y/y in October, a slowdown from the 2.3% increase in the previous month and below the market forecast of 2.5% growth. This marked the 10th consecutive month of expansion, though it was the weakest in this period.

China: China's exports increased by 6.7% y/y in November, falling short of the market's 8.5% expectation. This growth rate declined from the previous month over a two-year high, influenced by escalating trade tensions. Exports grew for the eighth consecutive month as manufacturers expedited orders in anticipation of potential tariffs under Trump's administration. On the other hand, imports fell by 3.9% y/y, a sharper decline compared to the 2.3% drop in October.

US: The NFIB Small Business Optimism Index in the US surged to 101.7, the highest level since June 2021, up from 93.7 in October and surpassing forecasts of 94.2. This is the first time in 34 months that the index has exceeded the 50-year average of 98, largely due to the presidential election results.

Fixed Income

Global Bonds: UST yields rose Tuesday as players were still cautious and awaiting the US inflation data. The sentiment was also guarded as the Treasury Department sold USD58 billion in 3Y UST, followed this week by US39 billion in 10Y and USD22 billion in 30Y sales. However, the 3Y auction received firm demand at a high yield of 4.117%, or just slightly above WI levels, where BTC was 2.58 times.

MYR Government Bonds: Government bonds closed mixed to weaker yesterday on hints of more profit-taking activity. Nevertheless, flows were relatively light, especially in benchmark papers. The 10Y MGS remained at 3.79% on less than MYR20 million volume.

MYR Corporate Bonds: Ringgit corporate bond trading was also mixed and mirrored the movement in the govvies segment. Notable trades yesterday include a couple of

AAA Cagamas 2028s where its 06/28 tranche fell 3 bps to 3.85% and 11/28 tranche fell 1 bps to 3.88%.

Forex

United States: The dollar extended its gains on Tuesday to follow higher bond yields ahead of the US inflation data, while also supported by expectations of dovish moves from other major central banks, including the ECB and Bank of Canada, alongside concerns over slower global growth as China reported weaker exports and shrinking imports. Helping the dollar bulls, the NFIB Small Business Optimism Index surged to its highest since June 2021, driven by optimism following the presidential election.

Europe: The euro fell 0.3% as an ECB quarter-point rate cut is anticipated amid economic struggles and political uncertainty in Germany and France, with traders closely watching for signals on the central bank's future direction.

Asia Pacific: The Aussie dollar dropped to its session lows after RBA's policy decision to hold rates aligned with expectations, but deliberate language shifts signalled a dovish tilt, fuelling a more than 64% probability of a February rate cut as markets interpreted Bullock's cautious stance on inflation and economic moderation as paving the way for easing. On the other hand, both the onshore and offshore yuan firmed despite the disappointing external trade data. The PBoC set its yuan reference rate at 7.1896, stronger than the Bloomberg estimates of 7.2798. The yen slid to a one-week low as uncertainty over the timing of the BoJ's next rate hike kept markets split between December and January.

Malaysia: The Malaysian ringgit trended lower, approaching the 4.44 per dollar level. We continued to see the currency traded cautiously within a tight range of 4.410-430 ahead of the US CPI data, and the trend would persist running up to the release on Wednesday.

Other Markets

Gold: Gold surged for a third session, climbing to circa USD2,700/oz, driven by rate-cut expectations, safe-haven demand amid Middle East turmoil, and resilience against a stronger dollar and rising Treasury yields.

Oil: Crude oil pared early gains as Brent and WTI rose as weak demand growth and increasing global supply offset concerns over Middle East instability and OPEC+ adjustments.

Source: AmInvest Research - 11 Dec 2024