Ringgit edges lower as caution prevails over Turkey

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KUALA LUMPUR (Aug 14): Ringgit drops for a third day and a gauge of expected volatility jumps as markets remain wary about further fallout from the Turkish crisis.

* USD/MYR gains as much as 0.1% to 4.0970

** Pair’s 1-month implied volatility rises 0.295 vol to 5.63

** Support for spot 4.0413, 4.0366, 4.0083; resistance 4.1093, 4.1230, 4.1355

** NOTE: Turkey’s central bank unveiled a series of measures Monday to revive confidence in the financial system. White House Security Adviser John Bolton told Turkey’s ambassador on Monday that the US has nothing further to negotiate until a detained American pastor is freed, according to two people familiar with the matter

* USD/MYR is likely to rise above 4.10, and the next level to watch would be 4.15, says Gao Qi, Singapore-based currency strategist at Scotiabank

** Co recommends buying USD/AXJ on dips until market concern over Turkish crisis eases

* Ringgit will probably remain weak, with the withdrawal of stimulus by major central banks expected to fuel capital outflows, RHB economist Peck Boon Soon wrote in a note Monday

** BNM may not have much room to tighten policy for rest of the year, as a change of leadership at state-linked firms weighs on the economy and inflation eases due to steady fuel prices

** Ringgit may overshoot co.’s year-end target of 4.10 but it’s unlikely to weaken severely, thanks to higher oil prices and Malaysia’s current-account surplus

* 10-year govt bond yield climbed 2bps to 4.06% Monday

* Auction of RM3 billion of 2033 government bonds closes at 11:30am local time

* Government may need to postpone, rather than cancel, a few ongoing projects linked to China as ending the contracts may be too expensive: PM Tun Dr Mahathir Mohamad