Ringgit Held Hostage By Continued Political Uncertainty

The ringgit treaded water overnight despite gains for benchmark palm oil futures, with the contract for February delivery consolidating above the MYR4,000/MT level, as high-frequency data on Malaysian exports indicated robust offshore demand for the tropical oil, which contrasted with estimates from industry groups that output has shrunk.

• Rival palm oil producer Indonesia's currency has outperformed the Malaysian ringgit this week after the pair's dynamic rally hit a ceiling at IDR3,464 last Wednesday, with the RSI moving firmly into overbought territory.
• Ringgit traders are closely watching Malaysia's political turmoil, with major political alliances struggling to agree on a governing coalition as the election generated a hung parliament. Reports are doing the rounds in local media of informal talks between Barisan Nasional and Perikatan Nasional being underway.
• The outcome of coalition talks will be critical for Malaysia's fiscal outlook, which has been shrouded in uncertainty since Barisan Nasional's poor showing in the election effectively ripper up Budget 2023, which was tabled by the outgoing BN administration but not passed by parliament.
• Spot USD/MYR last +10 pips at MYR4.5755 in late trading, with bulls looking for a push through the 50-DMA, which kicks in at MYR4.6423. Bears look for losses past the 100-DMA (MYR4.5495) and towards Nov 16 low of MYR4.4975.