Ringgit Shows Limited Reaction To BNM Rate Decision

Spot USD/MYR trades flat at MYR4.4245 at typing, after testing its Jun 14 cyclical high (MYR4.4255) on Wednesday, which saw the BNM deliver an expected 25bp rate hike.

• From a technical perspective, bulls look to a break above the aforementioned MYR4.4255 level, before targeting Mar 23, 2020 high of MYR4.4490. Bears need a retreat under Jun 28/17 lows of MYR4.3958/45 to get some reprieve.
• The ADX index is edging higher following a slide since mid-May, with the spot rate climbing over the past few days.
• Bank Negara Malaysia raised the Overnight Policy Rate by 25bp Wednesday, in line with our predictions and Bloomberg consensus forecast. The Bank flagged its concern with elevated inflationary pressures, fuelled by "elevated commodity prices and strong demand conditions." The BNM said that headline inflation "is projected to remain within the 2.2% - 3.2% forecast range" in 2022, but it "may be higher in some months due mainly to the base effect from electricity prices." While acknowledging the need to withdraw some of the unprecedented monetary stimulus, policymakers pledged that "any adjustments to the monetary policy settings going forward would be done in a measured and gradual manner."
• Looking ahead, Malaysia's industrial output will be out on Friday.