Weakens To Eight-Month Low, Political Tensions Boil Over Ahead Of BNM Decision

Spot USD/MYR has added 100 pips as onshore ringgit reopened, digesting the overnight uptick in the greenback and political shenanigans occupying national front pages in Malaysia. The rate last sits at MYR4.1715.

• Bank Negara Malaysia will deliver their monetary policy decision today and almost all analysts expect them to leave the Overnight Policy Rate unchanged. Among the 21 analysts surveyed by BBG, there are only 2 dissenters (Nomura and OCBC) who look for a 25bp cut.
• We join the pack forecasting no change to the OPR today. Our comprehensive preview, including our own view and a summary of sell-side notes can be accessed here. Our Policy Team reckons that BNM may "consider its first rate cut in a year at its meeting this week, but it may prefer to leave its policy settings unchanged.
• Citi put in their two cents after the release of our preview, noting that "the hurdle for a BNM rate cut has yet to be decisively crossed".
• BNM's deliberations will not be made easier by a spiralling political crisis in Malaysia. Early this morning, UMNO withdrew its support for PM Muhyiddin and demanded his immediate resignation. We covered the details and relevant source reports in an earlier bullet.
• On the virus front, Malaysia allowed key sectors in Selangor to resume operations during lockdown, to avoid disruptions in the supply of essential goods.
• From a technical perspective, a breach of Jun 24 high of MYR4.1710 turns bullish focus to MYR4.1745, where the rate peaked on Nov 4, 2020. Above there opens Sep 28, 2020 high of MYR4.1768. Bears look for a retreat under Jul 6 low of MYR4.1480, towards Jun 25 low of MYR4.1423.