Ringgit volatility rises before U.S. CPI report

KUALA LUMPUR: A gauge of anticipated ringgit volatility rises for a second day before a U.S. inflation report on Friday that may provide guidance about when the Fed will resume raising interest rates.

* 1-month implied volatility for US/MYR climbs 1bp to 5.72%

* USD/MYR little changed at 4.2847 after rising 0.2% Monday

** Support 4.2760, 4.2663, 4.2505; resistance 4.3022, 4.3055, 4.3217


* Ringgit may come under pressure as a meeting between oil producers to address oversupply is likely to disappoint, says Sean Yokota, head of Asia strategy at Skandinaviska Enskilda Banken AB in Singapore

** Traders have reduced short US dollar positions after last week’s NFP report and this may continue if there’s a strong print in U.S. inflation data this Friday

Still, emerging markets remain attractive in the face of rising interest rates in the developed world as growth is holding up and inflation remains contained

Ringgit is among EM FX that Morgan Stanley favours, according to a report released Monday

Co. suggests using Europ to fund purchases of EM currencies as EM remains fundamentally in good shape and valuations look cheap against EUR

Malaysia’s 10-year goverment bond yield little changed at 4%

Foreign ownership of Malaysian sovereign and corporate debt securities fell 1.2% to RM192bil in July from previous month: central bank data showed late Monday
The souece

Although there’ll be sizable bond redemptions from August to October, there are unlikely to be significant maturity-driven outflows as foreign ownership of Islamic securities is low and holdings of other notes have been reduced, Winson Phoon, a fixed-income analyst at Maybank Investment Bank, wrote in note Monday

Second half will be challenging as external risks such as a change in market pricing on the pace of further Fed hikes may shift broad EM flow sentiment

Global funds bought net RM151.2mil of Malaysian stocks last week, a 4th week of purchases: MIDF Amanah Investment - Bloomberg


Source: The Star