Snapshot Summary

Global FX: The greenback saw softer trading volume due to US holiday

Global Rates: Bund yields neared weekly lows on weak German PPI data

MYR Bonds: Trading activities favoured shorter bonds ahead of CPI data this week

USD/MYR: The ringgit strengthened by 0.3% as it capitalised on the dollar's brief pause in its rally

Macro News

Germany: Germany's PPI increased by 0.8% y/y in December 2024, up from a 0.1% rise in November but below the anticipated 1.1% increase. This marked the second consecutive month of growth in producer prices following more than a year of deflation.

Malaysia: Malaysia's trade surplus expanded to MYR19.2 billion in December 2024, up from a marginally revised MYR11.8 billion in December 2023, significantly surpassing market expectations of MYR16.6 billion. This was the largest trade surplus since September 2023, driven by a substantial increase in exports, which rose by 16.9% y/y to a 27-month high of MYR138.5 billion. Meanwhile, imports increased by 11.9% y/y to a four-month peak of MYR119.3 billion, the fastest growth in four months, far exceeding forecasts of 3.3%.

Fixed Income

Global Bonds: The US was in holiday mode on Monday, which caused little trading in global bond markets and moved yields in a tighter range. Sentiment in global bonds was cautious as Trump took office, but news reports suggesting his promised tariff is delayed may support bonds this week. Bund yields remained near weekly lows after the weaker-than-expected German PPI release.

MYR Government Bonds: In the local government bond space, we note that trading was done in a narrow range ahead of the US holiday and Trump's inauguration. We also noted that trading activities were slanted on shorter-tenor bonds as we think players were cautious against longer tenors ahead of this week's Malaysia's CPI release. On the IRS front, levels were traded slightly lower in line with UST yields.

MYR Corporate Bonds: Yields moved sideways in the local corporate bond space, but flows were more active, and there was firm demand on various higher-grade names. Notable gains include Air Selangor 10/28 (AAA), which fell 6 bps to 3.84%. As for losers, PLUS 01/28 (AAA) rose 13 bps to 3.85%.

Forex

US: Trading volume was reported to be lighter than usual because US markets were closed for the Martin Luther King Jr. Day holiday. Nonetheless, the greenback swung within a large intraday range of 107.92 - 109.47 on Monday as traders learned the new administration is not in a hurry to impose higher tariffs, sparking a surge in currencies linked to US trade partners. Still, with President Trump signalling his intent to ramp up duties through an External Revenue Service and a series of executive moves, markets remain cautious about fresh inflation pressures and a potentially higher-for-longer Fed's stance.

Europe: The euro surged 1.4%, climbing back from last week's two-year low as the dollar dropped on signs President Trump will apply tariffs at a slower pace. On the ECB side, key policymakers like Robert Holzmann expressed that he considers there are possibilities the central bank would remain on the easing path during the January meeting, while Joachim Nagel highlighted the importance of the ECB exercising caution and refraining from hasty rate reductions, citing persistently high inflation and substantial uncertainty. Last night's slower-than-expected growth in Germany's producer inflation may support the ECB in trimming the rates further. Meanwhile, the GBP also rebounded 1.3%. The focus will be on the UK's employment data later today.

Asia Pacific: The yen strengthened by 0.4% against the softer dollar, buoyed by stronger-than-expected machinery orders and anticipation of the BoJ's policy decision on Friday. With inflation and wage growth remaining robust and officials hinting at further tightening, markets are betting on another rate hike. The yuan rallied above 7.30 against the dollar, marking a three-week high, after the newly inaugurated President Trump opted for a gradual tariffs approach rather than abrupt ones. Also, PBoC left its main lending rates unchanged yesterday, as the market forecasted. Both commodity-linked currencies, AUD and NZD, also surged 1.3% and 1.6%, respectively.

Malaysia: Most Asian currencies firmed on Monday, buoyed by a temporary halt in the dollar's rally ahead of US President Donald Trump's inauguration during the Asia session. The ringgit took advantage as well, firming up 0.3% to 4.493. For today, the ringgit could stand for further gains, but caution ensues for a potential turnaround in the tariff gradual approach.

Other Markets

Gold: Gold increased by 0.2% due to Trump's delayed US tariff rollout. While Trump has floated 60% tariffs on Chinese imports, investors remain uncertain given his conciliatory phone call with President Xi and the reversal of a TikTok ban, adding to the market's volatility.

Oil: Crude prices dipped in thin holiday trading after President Trump softened his tariff stance on China, Canada, and Mexico while pledging to ramp up domestic oil production. Market anxiety also receded on news of a Gaza ceasefire.

Source: AmInvest Research - 21 Jan 2025