Ringgit approaches four-month low as stocks slide

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SINGAPORE (May 24): Malaysia’s ringgit drops toward the weakest in four months and local stocks decline as concern about the nation’s post-election outlook and financial losses at 1MDB help undermine confidence.

* USD/MYR rises 0.1% to 3.9870 after reaching 3.9875 on May 14, weakest since Jan. 11

** Resistance at 4.0060, 23.6% Fibonacci retracement of decline from January 2017 to April 2018 

* “Despite firmer oil prices, USD/MYR is again trading at just a tad below 4 handle," says Andy Ji, Asian currency strategist at CBA Singapore

** “It has given up all its post-election loss, as reality sinks in. On that note, uncertainties linger and dampen sentiment, in particular on the future direction of economic policy and growing fiscal pain from 1MDB scandal. KLCI has sold off sharply"

* CPI was 1.4% y/y in April vs est. +1.6%: Department of Statistics said Wednesday
* Directors of 1MDB confirmed that company was "insolvent" and unable to repay its debt, Malaysia Finance Minister Lim Guan Eng said in statement Wednesday

* Govt of former PM Najib Razak turned to the central bank to pay off $500m owed by state investment fund 1MDB, Wall Street Journal reported, citing people familiar with the transaction 

* There’s a danger of contagion to other emerging markets from the deteriorating situation in Turkey, said Mark Mobius, who left Franklin Templeton Investments earlier this year and set up
Mobius Capital Partners

* Malaysia will sell RM1.0b of 91-day bills Thursday

* 10-year bond yield drops 1bp to 4.20%