Ringgit falls to 9-month low on contagion fears

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KUALA LUMPUR (Sept 5): Malaysia’s ringgit drops to the lowest in more than nine months as a selloff in emerging markets fuels contagion fears. The central bank will review policy on Wednesday.

* USD/MYR climbs 0.2% to 4.1455, highest since November

** Support 4.0900, 4.0718, 4.0413; resistance 4.1533, 4.1645, 4.2437

* Volatility in EM Asian FX will increase as central banks weigh the need to bolster their currencies, says Mingze Wu, FX trader at INTL FCStone Global Payments in Singapore

** “Speculators versus central banks are never dull affairs”

* USD/MYR is likely to rise to 4.20 by year-end as the dollar continues to strengthen on higher U.S. rates and global trade tensions, DBS economist Irvin Seah wrote in note Tuesday

** BNM will probably maintain a stable monetary policy through 2019, while allowing the ringgit to weaken further, as risks to growth increase and inflation remains muted

* Central bank will maintain its benchmark rate at 3.25% in its decision due at 3pm local time, according to all 17 economists in a Bloomberg survey

** READ: Malaysia Decision Guide: Rates on Hold as Fiscal Worries Mount

* Malaysia’s 10-year bond yield rose 6bps Tuesday to 4.12%, highest in almost 2 months

* July trade figures due at noon local time, with export growth forecast at 4.7% y/y vs +7.6% in June 

** Trade surplus probably widened to RM6.7b in July from RM6.05b in June: survey