KUALA LUMPUR: AmResearch see the upside for the ringgit as limited due to the weak sentiments on both the domestic and external fronts as well as the slide in China's yuan.
“On that note, our support level holds at 4.0161 and 4.0240 and we anticipate the ringgit to test our resistance level of 4.0320 and 4.0464,” it said on Thursday.
AmResearch said it would continue to watch for developments on the US-China trade war while on the data front, the 1Q2018 US GDP final estimate was due.
Meanwhile, Stephen Innes, head of trading for Asia Pacific at OANDA, said with the US$-China yuan breaching fresh highs, the US$-ringgit continues trading higher in sympathy with the Yuan weakness.
The overnight headlines of the Chinese think-tank have local investors extremely concerned.
“And with the US$ dollar reasserting itself as the unquestionable hedge against escalating trade war, there's no escaping the wrath of a stronger US$.
“The surging US$ and prospect of escalating trade war, indeed the path of least resistance appears higher with the next key focus on 4.05,” he said.
AmResearch said on Wednesday, the ringgit slipped 0.2% to 4.0300 against the dollar.
It weakened against the regional currencies – the rupiah by 0.2% to 3518.36, baht by 0.1% to 8.2030 and peso by 0.3% to 13.2844 but strengthened against the Singapore dollar by 0.1% to 2.9520.
The credit default swap (CDS) rate rose 2% to 108.43. According to Wikipedia, the CDS is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event.
On the equities front, the FBM KLCI dropped 0.6% to 1,666.08, recording a net outflow of RM256.3mil in foreign funds.
AmResearch said as for the local bond space, market interest was seen on the belly of the curve with the five-year MGS yields remaining unchanged at 3.850% while the seven-year rose one basis point (bps) to 4.060% and 10-year MGS fell 3.5bps to 4.210%, respectively.
As for crude oil prices, namely WTI and Brent gained 3.2% and 2.2% to US$72.76/barrel and US$78.02/barrel, respectively as the EIA crude oil weekly inventory continued to decline by 9.9 million barrels from a contraction of 5.9 million barrels, the biggest fall since September 2016.
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