Snapshot Summary

Global FX: Dollar slipped following President Trump's remarks at Davos

Global Rates: UST yields were mixed as sentiment was on the cautious side globally

MYR Bonds: Local govvies continue to see support following a decent 3Y GII auction

USD/MYR: The Ringgit pared back some of the previous gains it made but continued to trade below the 4.50 level

Macro News

Japan: Japan's trade surplus surged to JPY 130.94 billion in December 2024, far exceeding market expectations of a deficit driven by a 2.8% y/y rise in exports. Machinery and electrical machinery shipments saw notable growth, while transport equipment exports declined. Imports grew by 1.8% y/y, with significant increases in machinery and manufactured goods, though mineral fuels and electrical machinery imports fell.

Singapore: Singapore's annual inflation rate held steady at 1.6% in December 2024, slightly above market expectations, with core inflation easing to 1.8%, the lowest over three years. Prices rose for food, healthcare, and transport, while private transport costs fell slower. For 2024, core inflation averaged 2.7%, down from 4.2% in 2023, with overall inflation at 2.4%, a significant drop from the previous year's 4.8%.

Fixed Income

Global Bonds: UST yields were mixed. We think the sentiment was guarded, and we are awaiting more statements from the US president on his trade policy. A rise in weekly jobless claims pared the losses.

MYR Government Bonds: The local government bond market closed steadily, with benchmark MGS papers closing in a narrow range. Yesterday's highlight was the reopening of GII 07/28, which fetched a strong BTC of 2.6x as we think players snatched the opportunity to buy the new 3Y GII benchmark at an attractive 3.561% yield. Post-tender saw the paper rally by another 1 bps to 3.55%.

MYR Corporate Bonds: The ringgit corporate bond tray was mostly firm yesterday, though we still noted some net selling activity on select names. Flows were led by AAA-rated PSEP 05/27, which rose 2 bps to 3.75%, while PSEP 11/27 fell 6 bps to 3.78%.

Forex

US: The dollar weakened slightly as President Trump, speaking in Davos, pushed for lower interest rates and cheaper oil, urging Saudi Arabia and OPEC to boost production to pressure Russia. While equities responded positively to Trump's call for lower rates, the dollar faced headwinds, with traders sceptical about the Fed's likelihood of cutting rates amid Trump's tariff threats. Data on Thursday showed initial jobless claims rose marginally last week.

Europe: Next week's rate decisions from the Fed and ECB are in focus, with markets expecting a 96% chance of an ECB rate cut. The euro edged up 0.1% to 1.0422. The EU's Commission Valdis Dombrovskis said the region is considering energy and arms purchases from the US to avoid Trump's threatened tariffs while emphasising the bloc's readiness to defend its interests if tariffs are imposed. Meanwhile, GBPUSD climbed 0.3% at 1.235.

Asia Pacific: The yen surged 0.4%, leading the G10 currencies against the dollar, as the BOJ's two-day policy meeting began with a 94% chance of a rate hike priced in. On the data front, Japanese exports exceeded expectations, rising 2.8% year-on-year in December 2024, marking the third consecutive month of growth. The yuan weakened in both onshore and offshore markets as investors weighed local sentiment-boosting measures against the threat of higher US tariffs. China urged mutual funds and insurers to increase their equity holdings to prop up local equities.

Malaysia: Ringgit pared back some of its previous gains, declining by 0.2%, but the USDMYR pair continued to trade below the 4.50 level. This is in tandem with mixed regional performances as markets continue hinged by Trump's tariff sentiment. While the latest news flows suggest a benign development, we continue to be cautious about any emerging signs of trade barriers.

Other Markets

Gold: Gold pared losses after President Trump called for lower interest rates at Davos, causing the dollar to fluctuate. Bullion regained some ground as lower borrowing costs typically benefit precious metals, and haven demand increased amid concerns over the new administration's trade policies.

Oil: Oil prices fell after President Trump announced plans to pressure Saudi Arabia and OPEC to lower crude prices, a tactic he used during his first term. West Texas Intermediate traded around USD75 per barrel, while Brent slipped nearly below USD78 per barrel.

Source: AmInvest Research - 24 Jan 2025