KUALA LUMPUR (Sept 7): Standard Chartered recommends selling USD/MYR via 3-month onshore deliverable forwards with spot target of 4.00 and stop-loss of 4.36, strategist Divya Devesh writes in a report.
* MYR remains among the most undervalued EM FX
** Real effective exchange rate is well below historical average and still close to 1997 levels: report
* Foreign investors’ overall positioning remains extremely light in the historical context, and MYR also benefits from Malaysia’s strong linkage in the global supply chain amid robust global export volumes
* MYR sentiment onshore has improved with better USD supply dynamics; onshore FX turnover is well off its late-2015 lows and onshore foreign currency deposits have turned a corner
* Strong pace of 1H growth increases risk of a pick-up in core inflation, and if growth continues to surprise on the upside, expectations for a rate hike may build up
* NOTE: USD/MYR down 0.3% to 4.2455 Wednesday, lowest in 10 months