Ringgit recovers as USD retreat lifts Asian FX

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KUALA LUMPUR (May 31): Ringgit rebounds from a four-month low after the dollar retreated Wednesday as traders reassessed the risks arising from Italy’s political developments.

* USD/MYR declines for the first time in 4 days, dropping 0.2% to 3.9820; pair reached 3.9952 Wednesday, highest since Jan. 11

** Support 3.9430, 3.9174, 3.8533; resistance 4.0060, 4.0155, 4.0589

** Bloomberg Dollar Spot Index steady after sliding 0.6% overnight

* Recovery in EM Asian FX may be brief as Italy’s lingering political woes and upcoming U.S. data could reignite volatility, says Christopher Wong, senior FX strategist at Maybank in Singapore

** Stronger set of U.S. core PCE and wage data may lift UST yields again and reignite fears of another EM selloff * 10-year yield fell 1bps to 4.26%

* Govt sold RM4b of 2023 Islamic bonds at avg 4.094% yield with bid-to-cover ratio of 1.99 times Wednesday

** Sentiment at sale was cautious amid higher USD/MYR and concerns about govt’s RM1t debt, Winson Phoon, head of fixed-income research at Maybank Kim Eng Securities in
Singapore, wrote in note 

* StanChart remains selectively long EM local-currency debt although foreign funds are not in a hurry to add risk, according to note

** Rates positioning is high for South Africa and Malaysia 

* Govt will implement a new sales tax in September to replace the consumption levy that it’s scrapping next month: PM Mahathir Mohamad

* Authorities will restructure state debt to address fiscal risk and plans drastic short-term measures to restore budget position: Economic Affairs Minister Azmin Ali

* State oil firm Petronas reported a 26% increase in 1Q profit after tax to RM13b from yr earlier