Ringgit inches lower as crude extends decline

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KUALA LUMPUR (May 28): Ringgit edges lower for a second day as a slump in energy prices overshadows a decline in the dollar.

* USD/MYR rises 0.1% to 3.9835

** Support 3.9430, 3.9144, 3.8533; resistance 4.0060, 4.0155, 4.0619

** BBDXY -0.2%; Brent sank to a 3-week low of $74.49 after Saudi Arabia and Russia proposed easing output curbs 

* Drop in crude prices is supply-driven and has smaller impact on MYR than in 2015 when the slump in prices was fueled by falling global demand, says Maximillian Lin, EM Asia strategist with NatWest Markets in Singapore

* Ringgit has been stable as the smooth transition of power in Malaysia helped to limit the fallout from a stronger USD and higher UST yields, says J. Suresh Sundaram, FX strategist with CIMB in Kuala Lumpur

** MYR will probably hold its ground vs USD as U.S. yields are expected to come under pressure, increasing the appeal of Malaysian bonds

* 10-year govt bond yield rises 14bps to 4.26%

* Govt to auction RM4b of 2023 Islamic bonds Wednesday

* Payments made by Malaysia govt on behalf of 1MDB, including a RM6.98b transfer in April 2017, amount to a “major bailout” of the state investment co.: Finance Minister Lim Guan Eng

** Former PM Najib Razak denied hiding RM300b of state debt, saying govt under him complied with international public debt reporting guidelines 

** Police seized ~ $29m in cash, hundreds of handbags, as well as jewelry and watches in raids linked to former PM Najib amid an investigation into 1MDB

* Govt won’t impose a planned sales and services tax on June 1 and will decide later on when to implement the levy: Director-General of Royal Malaysian Customs