BNM States Ringgit Undervalued

Spot USD/MYR sits just under 4.7800, little changed for the session. After spiking above 4.8000 last week, fresh highs back to the late 1990s. We haven't drifted too far out of the 4.77/4.78 range.

• Comments have crossed from the BNM Governor that the local FX is undervalued and that the central bank will step up coordination with corporates and investors to encourage inflows into the FX market (BBG).
• This follows comments from the PM last week, which expressed concern around FX levels/depreciation pressures.
• It suggests a renewed focus, with the 4.8000 level potentially as a near term line in the sand. Still, given Malaysia rates are sub major developed economies (US, EU etc), it may be difficult to attract strong inflows in the near term. Like elsewhere in the region, corporates may see greater returns keeping offshore receipts in foreign currency.