Malaysian Ringgit remains undervalued - ScotiaBank
Source: FxWire Pro - Commentary / 12 Feb 2018 08:57:58 America/New_York
The Malaysian ringgit has recently pared some gains in the midst of a widely appreciating dollar and declining oil prices. If U.S. January inflation were to come in considerably above market estimate of 1.9 percent year-on-year, the U.S. equity markets would face renewed pressure. Moreover, the 10Y UST yield rose 3 basis points to 2.851 percent last Friday. U.S. President Donald Trump on Friday morning signed a two-year budget agreement that will stimulate federal spending by nearly USD 300 billion and suspended the debt ceiling through 1 March 2019, along with a stopgap spending bill to end a brief government shutdown, noted Scotiabank.
The spending package is likely to stimulate U.S. economic growth and to strengthen the long-term UST yields. But, Malaysia’s fundamentals remain sound in the run-up to the 14th General Election. Malaysia’s manufacturing PMI is continuing the uptrend along with a broadening current account surplus as percent of GDP. Furthermore, overseas funds continue to increase their holdings in Malaysian Government Securities, purchasing a net MYR 4.17 billion in January.
“We believe the MYR is still undervalued in terms of either the NEER or the REER, particularly if taking into account the nation’s growth and monetary policy outlook. The BNM’s real policy rate is still in negative territory despite a 25 bp rate hike delivered on 25 January”, added Scotiabank.
FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest© FxWire Pro 2018. All rights reserved. The FxWire Pro content received through this service is the intellectual property of FxWire Pro or its third party suppliers. Republication or redistribution of content provided by FxWire Pro is expressly prohibited without the prior written consent of FxWire Pro, except for personal and non-commercial use. Neither FxWire Pro nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.