Morgan Stanley recommends long EUR vs ringgit on weak risk appetite

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SINGAPORE (July 13): Buy euro and sell ringgit via 3-month NDFs with target at 4.88 and stop at 4.71, Morgan Stanley strategists led by Hans Redeker write in a July 12 report.

* Trade switches the SGD leg of long SGD/MYR position, which it closed, to EUR

* Co. has bullish view on EUR as negative political noise from the euro area has quietened down and economic data has been more positive

* Bank Negara Malaysia kept its policy rate unchanged in latest meeting and CPI may slow in the months ahead

* MYR nominal effective exchange rate is the most reactive in Asia to large shifts in risk appetite; with the latest escalation in U.S.-China trade tension and the dollar gauge continuing to rally, co. expects MYR to underperform

* READ: New Malaysia Central Bank Chief Strikes Neutral Tone on Rate (1)