Published at 14:30 (GMT) 21 Jan
USD/MYR backed off from the 3.6200 figure this morning, softening below 3.6100 as we write, largely because of oil price recovery and SGD/MYR pullback to 2.7000. Brent futures up >2% to around USD49/bbl, but still below the key USD50 mark. For USD/MYR, intraday momentum indicators are still showing bullishness as long as the pair can maintain above the 3.6045 support. On the upside, USD/MYR needs to take out strong 3.6290 hurdle to trigger stronger upmove though that may look unlikely today with market focus firmly train on ECB policy rate decision at 1245GMT, and more important, governor Draghi's press conference around 1330GMT.
In the local government bond markets, Fitch's warning of increasing risks to undershooting Malaysia's fiscal targets pressured the MGS yesterday. 10-year MGS yields rose 7bps to 3.99% while 3-, 5- and 7-year yields edged up 2-3bps. Meanwhile onshore IRS levels mostly retreated on Wednesday. 5-year IRS returned to 3.93%. 3M KLIBOR maintained at 3.86%.
More negative comments from Fitch. The rating agency said that the financial position of 1MDB has become a source of uncertainty, adding that the close contingent liability of Malaysia sovereign due to the nature of its operations and leadership and explicit sovereign guarantees of MYR5.8bn of 1MDB's MYR41.9bn debt at end-Mar 2014. Fitch reiterated that slippage of government's fiscal targets would be negative for Malaysia's rating, and sees downside risks to the country's current account surplus. BA
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