Ringgit Starts On Firmer Footing, Malaysia Flags Growing Cost Of Commodity Subsidies

Spot USD/MYR comes under pressure, playing catch up with risk-on flows seen after Asia hours Friday. The rate last deals at MYR4.3975, down 50 pips on the day.

• From a technical perspective, a clean break below MYR4.3945, which limited losses on Jun 17, would allow bears to set their sights on May 31 low of MYR4.3643. On the flip side, a move through Jun 23 high of MYR4.4078 would give bulls a green light for targeting Jun 14 high of MYR4.4255.
• Sentiment improved on Friday, which was reflected in strong performance from global equity markets, partly due to a moderation in U.S. inflation expectations and reassuring comments from Fed's Bullard re: recession risk.
• Palm oil futures have stabilised near recent lows. The active contract struggled to make much headway beyond MYR4,500/MT after printing a five-month low just shy of that level last week.
• The cost of keeping a lid on price of key commodities is growing. Malaysian FinMin Zafrul said that the government is expected to spend a record MYR77.3bn on subsidies this year, including MYR37.3bn earmarked for gasoline, diesel and cooking gas if their prices remain at current levels.
• Elsewhere, the Straits Times reported that representatives of the two main factions within the UMNO party, led by party president Zahir and PM Ismail Sabri, have been working to form a united front ahead of the next general election.
• Little to write home on the local docket this week, the only point of note is Friday's release of S&P Global M'fing PMI.