Ringgit Modestly Outperforming Other Asia FX Post BNM Verbal Rhetoric

USD/MYR is tracking modestly lower in the first part of Wednesday trade, the pair under 4.7600. This is close to late Tuesday lows for the pair. We were up close to 0.35% in MYR terms for yesterday's session, which came post the central bank's verbal rhetoric that the ringgit should be trading at stronger levels.

• The recent move lower now sees us challenging the 20-day EMA. We haven't spent time below this support level since the early stages of Jan this year.
• The MYR is outperforming the rest of the EM Asia FX complex so far today, with most other USD/Asia pairs modestly higher.
• Note the 50-day EMA sits further south near 4.7300. Whilst recent highs just above 4.8000 remain intact for now.
• We may need to see a broadly softer USD backdrop to drive meaningful USD/MYR downside. The MYR has had an historically strong correlation with USD/CNY, which remains elevated, while capital flows into Malaysia may remain modest.
• A more hawkish BNM backdrop may do more harm than good, as it could dent domestic growth, whilst only closing the yield gap with the US marginally.