Ringgit extends advance as rate increase looms

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KUALA LUMPUR (Jan 19): Ringgit heads for a fourth week of gains as oil prices stay supported and traders brace for a possible interest-rate increase.

* USD/MYR falls 0.3% Friday and 0.8% this week to 3.9420, earlier reached 3.9390, strongest since July 2016

** Support 3.9300, 3.9038; resistance 4.0465, 4.0812, 4.0965

* BNM reviews policy on Jan. 25; said in November it “may consider reviewing the current degree of monetary accommodation” due to an improving outlook

* There’s a case for BNM to tighten policy due to Malaysia’s improving growth trajectory but the timing of a rate hike will be a close call, says Sim Moh Siong, currency strategist at Bank of Singapore

** “There’s room for a bit more ringgit strength but for now I would expect the authorities to smooth the extent of the ringgit’s appreciation and it’s a chance to build up reserves”

* 10-year bond yield climbed 4bps Thursday to 3.92%

* State Street Global Advisors favors bonds of Malaysia, Thailand, Indonesia and China and expects strength in regional currencies to support the rally in local-currency bonds, says Ng Kheng Siang, Asia Pacific head of fixed income

* Amundi Asset Management likes Indonesian, Indian and Malaysian bonds as well as their currencies, and expects rates in the region to remain low as inflation is still benign, according to Wan Howe Chung, head of Asian fixed income