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Rally Continues, Within Sight Of 4.2000 Level

MYR
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USD/MYR continues to track lower. The pair is down a further -0.45% today, last at 4.2265/70. This brings ringgit gains in this holiday shortened week to 1.4%, comfortably the best performer in EM Asia FX. We are now back at levels that prevailed in mid April last year. MYR gains have accelerated since the 50-day MA fell below the 200-day MA, forming a so called death cross around a week ago. MYR has jumped ahead of IDR to be the second best performer (trailing only THB) within the region YTD to date.

  • Short term technicals (RSI) warn of oversold conditions in the pair, but ringgit bulls will be focused on test back sub 4.2000. which would take us back to the early March 2022 levels.
  • Optimism around the China re-opening theme is a clear positive for rinngit, as is the firmer CNY, which has typically had a tight relationship with the China yuan. Still, recent MYR strengths look to be outperforming these trends, see the chart below.
  • Other positives are the firmer commodity price backdrop, although oil and palm oil haven't shifted much of over the past week.
  • There is also scope for flows in local government bonds, particularly post the recent surprise on hold decision by BNM. There is a 5bn MYR bond sale later today.
  • The local data calendar remains quiet until the PMI prints on the first of Feb.

Fig 1: USD/MYR & USD/CNH Trends

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USD/MYR continues to track lower. The pair is down a further -0.45% today, last at 4.2265/70. This brings ringgit gains in this holiday shortened week to 1.4%, comfortably the best performer in EM Asia FX. We are now back at levels that prevailed in mid April last year. MYR gains have accelerated since the 50-day MA fell below the 200-day MA, forming a so called death cross around a week ago. MYR has jumped ahead of IDR to be the second best performer (trailing only THB) within the region YTD to date.

  • Short term technicals (RSI) warn of oversold conditions in the pair, but ringgit bulls will be focused on test back sub 4.2000. which would take us back to the early March 2022 levels.
  • Optimism around the China re-opening theme is a clear positive for rinngit, as is the firmer CNY, which has typically had a tight relationship with the China yuan. Still, recent MYR strengths look to be outperforming these trends, see the chart below.
  • Other positives are the firmer commodity price backdrop, although oil and palm oil haven't shifted much of over the past week.
  • There is also scope for flows in local government bonds, particularly post the recent surprise on hold decision by BNM. There is a 5bn MYR bond sale later today.
  • The local data calendar remains quiet until the PMI prints on the first of Feb.

Fig 1: USD/MYR & USD/CNH Trends

Keep reading...Show less