Ringgit eyes opposing cues from oil, trade war

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KUALA LUMPUR (March 15): Ringgit erases early gains as concern over increasing U.S. trade protectionism offsets the supportive effects from a rebound in energy prices.

* USD/MYR is little changed at 3.9070 after dropping 0.1% to 3.9005

** Support 3.8857, 3.8663, 3.8465; resistance 3.9313, 3.9326, 4.0055

** Brent crude +0.1%

* MYR has been affected by portfolio outflows although it has fared better than some regional peers such as INR, says ANZ senior currency strategist Irene Cheung

** Remains constructive on MYR given Malaysia’s improving current-account balance, robust commodity prices and monetary tightening

* The medium-term risk relating to trade and economic growth has increased and Asia, especially China, would be most affected should President Trump decide to address the trade deficit, Credit Agricole strategists led by Sebastien Barbe wrote in report Wednesday

** Incoming White House economic adviser Larry Kudlow signaled that Trump would take a tougher line on trade with China

* 10-year yield ended 1bp down at 3.96% Wednesday

* Malaysia’s financial stability remains well-supported although global factors may fuel bouts of higher volatility amid continued two-way capital flows: BNM

** Potential risks will be cushioned by the favorable outlook for the Malaysian economy and the presence of large domestic institutional investors

* Govt is expected to boost spending in 1H to bolster electoral support in what’s shaping up to be a close race, before reducing expenditure for rest of the year: BMI Research

* State fund 1Malaysia Development Bhd said Wednesday neither it nor the govt can claim the 104m francs currently held by Swiss Federal Treasury as the funds don’t belong to them

** Funds are the result of a fine by the Swiss Financial Markets Authority against certain banks