KUALA LUMPUR (Oct 11): Ringgit rises to two-week high after the dollar slumped and energy prices rallied overnight.

* USD/MYR falls 0.1% to 4.2135; reached 4.2095, lowest since Sept. 26

** Support 4.2090, 4.1825, 4.1733; resistance 4.2440, 4.2491, 4.2686

** Bloomberg Dollar Spot Index drops 0.1%; Brent crude steady after rising 1.5% Tuesday

* Ringgit remains Oanda Corp’s “go-to trade” in the region due to Malaysia’s relatively high yield and undervalued equity market, says Stephen Innes, Singapore-based head of trading for Asia- Pacific

** Ringgit also helped by positive macro outlook and foreigners’ light positioning even as BNM’s “rigid” FX policy hurts sentiment

** EM Asian FX likely to trade on a stronger note on Wednesday due to weaker USD, minimal fallout from the Turkish tumult and as concerns over Spain abate for now

* United Overseas Bank sees USD/MYR reaching 4.20 by year-end amid a positive outlook for crude prices and expectations for the government to unveil a pro-growth national budget this month while sticking to its fiscal-deficit reduction plans, economist Julia Goh wrote in note Tuesday

** Key risks to watch include a rise in U.S. inflation and bond yields, slower bond inflows into the region as the Fed unwinds its balance sheet and geopolitical risks

* 10-year govt bond yield fell 2bps Tuesday to 3.91%

* Govt to auction RM1.5b of 2037 Islamic bonds on Thursday

* Industrial production +5.8% in Aug. y/y vs 6.1% July: Bloomberg survey before data due Thursday