Market Sentiments Continued To Be Influenced By Fluctuating Currencies

In the Weekly Money Review for June 2024, as cited by MIDF Investment Bank (MIDF), the Malaysian ringgit showed resilience against the US dollar, marking a slight gain of +0.2% to RM4.709. However, against other major trading partners and regional currencies, the ringgit faced depreciation, contributing to MIDF’s Trade-Weighted Ringgit Index closing -0.1% lower at 86.14.

Notably, the ringgit weakened against the euro and Australian dollar but strengthened considerably against the Taiwan dollar and South Korean won. Positive movements in commodity prices, with Brent crude oil rising by +0.2% to USD86.54 per barrel, provided some support to the ringgit amidst varying currency dynamics.

In contrast to previous weeks of strength, the US dollar experienced a notable retreat, as indicated by the DXY dollar index, which declined sharply by -0.9% to 104.88. This marks its weakest closing since mid-June 2024, driven by economic reports pointing to softer activity levels in the services sector and cooling conditions in the labour market throughout June.

Meanwhile, both the euro and pound sterling saw robust gains against the US dollar, appreciating by +1.2% to USD1.084 and +1.3% to USD1.282, respectively. The euro’s rise was bolstered by expectations of persistent inflationary pressures, while the pound sterling strengthened despite growing anticipation of an upcoming interest rate easing by the Bank of England.

In economic updates from the US last week, the services sector exhibited a significant contraction, with the ISM Services PMI dropping to 48.8 in June 2024, the sharpest decline since April 2020 and below market expectations of 52.5. Conversely, the S&P Global Services PMI surged to 55.3, surpassing forecasts of 55.1 and reaching its highest level since April 2022.

In manufacturing, the ISM Manufacturing PMI fell to 48.5, disappointing expectations for an increase to 49.1, while the S&P Global Manufacturing PMI rose slightly to 51.6, indicating continued expansion but below forecasts of 51.7.

Signs of cooling were also evident in the US labour market, with nonfarm payrolls increasing softer than anticipated at +206,000 in June 2024, although higher than market expectations of +190,000. The unemployment rate rose to 4.1%, surpassing forecasts for it to remain at 4.0%, while ADP data showed private sector hiring expanding at +150,000, the slowest pace in five months and below expectations of +160,000.

Initial jobless claims for the week ending June 29, 2024, also exceeded projections at 238,000, compared to an expected 235,000, underscoring increased labour market challenges despite a rise in job openings to 8.14 million in May 2024.

In Malaysia, the manufacturing sector reverted to contractionary territory, with the S&P Global Manufacturing PMI declining marginally to 49.9 in June 2024 from 50.2 in May 2024. This suggests subdued activity levels as production moderated and new orders grew at a slower pace.

The fluctuating currency movements and global economic indicators will continue to influence market sentiments and investment decisions, particularly in key sectors sensitive to currency exchange rates and international trade dynamics.

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