Snapshot Summary

Global FX: Dollar nears two-year high amid expectations of fewer Fed rate cuts

Global Rates: UST market flattens amid gains on bellies and long curve

MYR Bonds: Year-end lull in the local govvies market with notable profit taking activities

USD/MYR: Ringgit gained amidst subdued sentiment

Macro News

US: The Dallas Fed's Texas manufacturing activity index climbed six points to 3.4 in December, marking its first positive reading since April 2022.

Fixed Income

Global Bonds: The US Treasuries market received bids yesterday, which we think was mainly due to flows from the profit taking activity in the US stock market. We noted the UST market flattened amid gains on the bellies and long part of the curve, which was partly due to players taking advantage of the steep curve after the recent selldown.

MYR Government Bonds: The onshore government bond market saw more muted trading amid the year-end period. However, we noticed some profit taking activities possibly due to portfolio rebalancing.

MYR Corporate Bonds: The ringgit corporate bond market saw a pickup in trading interest yesterday which we think owed to some year-end rebalancing of portfolios, similar to the govvies segment. Notable trades include AAA rated PLUS 01/32 which rose 3 bps to end at 3.96%, and AAA Tenaga 11/41 on the longer part of the curve which fell 2 bps to close at 4.10%.

Forex

US: The dollar was stable near a two-year high on expectations of fewer Fed rate cuts and prospects of inflation staying above target given Trump policies. The DXY is on its way to mark 6.7% annual rise for 2024.

Europe: For the whole 2024, the euro is set for a 5.7% annual drop against the dollar, pressured by aggressive ECB rate cuts and expectations of more to come. Potential vulnerabilities against Trump's promised tariff also added another predicament for the common currency. Meanwhile, sterling was down 1.4% this year, remains under pressure from similar dynamics.

Asia Pacific: The yen firmed 0.7% on Monday but for overall 2024, it fell 11.2% against the strong dollar. The yen's current level is almost the same when the BoJ intervened in the market back in July, prompting cautious mode amongst traders for intervention risks. On a similar note, last Friday, Japan's Finance Minister Katsunobu Kato reiterated concerns over the yen's weakness, warning of potential government intervention against excessive currency volatility. The USD/CNY pair grinded higher as markets continue to bet against the yuan amidst unfavourable macro and sentiment backdrop for the currency. The official PMI data, which are expected to be released today, could become an early sign on how China's economy has fared during the last month of 2024. For the full year, the CNY fell 2.8% vs. the dollar.

Malaysia: While some Asian currencies were subdued, ringgit managed to hold its firm and posted 0.1% gains on Monday, to complete a surprisingly decent year with 2.8% gains for 2024, the only currency managed to do so against firm dollar.

Other Markets

Gold: Gold dipped 0.6%, though already posting above 25% YTD rally, attributed by heightened geopolitical tensions and global central banks embarking on an easing path that supported demand for safe haven assets.

Oil: Oil prices strengthened further on the back of tight supply in the US and also we think was due to traders expecting some better economic numbers especially out of China and the US in the coming few days. These include PMI and ISM survey data.

Source: AmInvest Research - 31 Dec 2024