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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MYR
MYR/IDR bears have succeeded in forcing a break through key support levels, opening the door to a deeper sell-off. The pair sank through its 50-DMA on Thursday but rejected the neckline of a double bottom pattern charted between mid-April and mid-June. That level is also gone now, with MYR/IDR changing hands at IDR3,339 which represents a new six-week low.
- The rupiah regained poise this month, halving its June losses against the ringgit, since MYR/IDR topped out just shy of the IDR3,400 mark but failed to pierce that figure.
- The dynamic retreat over the past couple of days shifts bearish technical focus to the recent cyclical low printed on Jun 7 at IDR3,284. On the flip side, a swing above the 200-DMA (IDR3,389) and the psychologically significant IDR3,400 barrier would suggest that bulls are taking control.
- This month's pullback is somewhat at odds with relative monetary policy dynamics, as Bank Negara Malaysia has already lifted its benchmark policy rate twice this cycle (by 25bp each time), while Bank Indonesia keeps its 7-Day Reverse Repo Rate at a record low.
- Palm oil market may provide an explanation, with the two top producers locked in fierce competition over market share since Indonesia lifted a temporary ban on exports. The freeze left Indonesian storage tanks aflush with the tropical oil, forcing the authorities to try and turbocharge shipments now.
- Indonesia's efforts to boost palm oil exports occur at a time when the commodity is finding a base after a nearly 50% retreat from its April peak. The most active contract traded in Kuala Lumpur printed a new two-week high today. The recovery in prices amplifies potential returns from capturing a larger share of the market.
- Earlier this week, Pres Widodo said he struck a deal with China to export an additional 1mn tons of CPO there, while Beijing committed to prioritising agricultural exports from Indonesia. This came on the heels of regulatory tweaks (export levy waiver) intended to boost shipments. Meanwhile, cargo surveyor data showed that Malaysia's CPO exports shrank in the first 25 days of the month.
Fig. 1: MYR/IDR
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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