Malaysian May trade figures continued to indicate towards a solid rebound. Exports in MYR terms rose sharply by 32 percent year-on-year while imports remained firm by rising 30 percent. Malaysia’s trade surplus alleviated slightly but stayed in healthy surplus territory. Elsewhere, the latest FX reserves for June rose slightly to USD 98.9 billion, enough to 7.9 months of retained imports and 1.1x short-term external debt.
The build-up has gathered momentum in the second quarter after the return of positive net foreign flows. This should assuage fears of renewed MYR weakness after it dropped in the past two years against the U.S. dollars on portfolio outflows and political risks.
So far in 2017, the Malaysian ringgit has appreciated more than 4 percent against the U.S. dollar. Earlier in June, the Malaysian central bank reported that the net FX short positions in forwards and futures of foreign currencies against the Malaysian ringgit moderated recently. This implies that a recent peak might have been seen and reflects improved confidence towards Malaysian ringgit, noted Commerzbank in a research report. On Thursday, the Malaysian central bank is widely anticipated to keep interest rates on hold at 3 percent.
“For USD/MYR, we look for ongoing consolidation near term between the 4.25-4.35 range”, added Commerzbank.
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