KUALA LUMPUR  (Jan 31): Ringgit rallies to strongest in more than five months after crude prices extended gains and the Federal Reserve signaled a prolonged pause in further tightening.

* USD/MYR falls as much as 0.5% to 4.0870, lowest since Aug. 10

** Pair dropped 1% in January, set for a second month of losses

** Support 4.0790; resistance 4.1549, 4.2020, 4.2437

* With momentum from the Fed’s policy outlook, USD/MYR is expected to target its 200-DMA of 4.0785 and approach 4.0490 in the short term, says Angus Salim Amran, head of financial markets at RHB Investment Bank in Kuala Lumpur

** BNM will probably retain an accommodative monetary policy, with the direction of interest rates determined by economic conditions

* 10-year govt bond yield rose 1bp Wednesday to 4.08%

* Govt sold RM4b of 2023 Islamic debt at avg yield of 3.862% Wednesday; bid-to-cover was 1.97 times

** Demand was decent even though spread between Islamic and conventional bonds has narrowed to ~10bps, signaling ample liquidity and healthy domestic appetite, according to note from Maybank Kim Eng Securities

** Co. expects 10-year yield to drop to 3.90% by end-June

* Malaysian exports and imports are forecast to increase 5% this year, with trade expected to moderate due to global uncertainties: Minister of International Trade and Industry Darell Leiking

* Govt is preparing a policy paper that will outline plans and priorities for next few years, according to a report in The Malaysian Reserve citing Daim Zainuddin, who led a team of advisers appointed by PM Mahathir Mohamad

* Govt will let Goldman Sachs decide how much it’ll pay of the $7.5b that the country is seeking for the bank’s role in how state fund 1MDB raised money, according to Tony Pua, political secretary to the finance minister

* Securities Commission fined Deloitte RM2.2m, the maximum penalty, for breaches related to a bond issuance by 1MDB