Ringgit rises to 3-month high on stock inflows

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KUALA LUMPUR (July 12): Ringgit climbs to a three-month high as overseas investors continue to snap up local equities and the dollar remains on the back foot. Malaysian industrial production figures are due.

* USD/MYR declines 0.1% to 4.1122 and reached 4.1090, lowest since April 15

** Pair has dropped 0.6% this week

** Support 4.1065, 4.0930, 4.0740; resistance 4.1545, 4.1840, 4.1935

* Global funds bought $10.3m of Malaysian stocks on Wednesday in a third day of inflows

* Brown Brothers Harriman expects USD/MYR to climb to 4.20 in 4Q and 4.25 by March next year, according to its FX quarterly received Thursday

** Federal Reserve policy and the U.S.-China trade war remain the biggest drivers for global markets

* Malaysia’s 10-year govt bond yield is steady at 3.63% 

* Risk-reward for Malaysian govt bonds is less favorable after the YTD rally and a further recovery in inflows would be dependent on Fed policy remaining dovish, says Winson Phoon, head of fixed-income research at Maybank Kim Eng in Singapore

** BNM’s May rate reduction was a preemptive move and the hurdle for a second cut is higher unless the global economy deteriorates substantially

** Maintains forecast for 10-year benchmark yield to rise to 3.90% by year-end

* Industrial production likely increased 3.5% in May y/y vs +4% prior, according to a Bloomberg survey ahead of a report due at noon local time

* Finance ministry said Thursday it has paid RM8.9b of 1MDB debt principal, leaving RM31.7b of debt outstanding

* Nation expects to exceed its 2019 approved investment goal of RM113.5b and has already attained about half the full-year target in 1Q, according to Malaysian Investment Development Authority