Ringgit rises to 1-week high amid stock inflows

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KUALA LUMPUR (Jan 28): Ringgit advances to the strongest in a week after the dollar slumped and inflows into Malaysian equities increased.

* USD/MYR drops 0.4% to 4.1088 after slipping to 4.1065, lowest since Jan. 18

** Support 4.0935, 4.0900, 4.0753; resistance 4.1547, 4.2020, 4.2437

** Bloomberg Dollar Spot Index slid 0.7% on Friday

* Overseas investors have bought $174.1m of Malaysian shares in January, on track for the first month of net purchases since September

* AmBank remains cautious about the ringgit, with market players likely to remain on the sidelines before Federal Reserve reviews policy this week, the company wrote in a note Friday

** Base case is still for BNM to remain on hold, although probability of a 25bp–50bp rate cut in 2019 has risen to 40% following last week’s review

** Outlook will depend on inflation staying muted and growing risks for nominal GDP to undershoot

* Sentiment toward Asia ex-Japan FX has been bolstered by the temporary reopening of the U.S. govt, but a raft of events this week will limit risk appetite, says Christopher Wong, senior FX strategist at Maybank in Singapore

** Traders will be watching the Brexit vote, Fed review, U.S.- China trade talks and dollar-sensitive data such as U.S. jobs and GDP

* Malaysia’s 10-year bond yield is little changed at 4.08%

* Govt has decided to terminate a $20b rail project with China Communications Construction, Economic Affairs Minister Mohamed Azmin Ali told reporters on Saturday

* Securities Commission said Saturday it’s still reviewing the conduct of auditors in relation to state fund 1MDB, and regulators will assess the findings and decide on the next course of action