1MDB rears its ugly head

The 1MDB scandal rears its ugly head again and could dent sentiment in local Bond markets over the short term after 1MDB failed to make good on debt payments to Abu Dhabi sovereign wealth fund as part of a debt settlement dispute.
And while the regional geopolitical knock on from North Korea appears well contained further escalation will likely create unwanted local volatility and could spur capital outflows
But the USD MYR despite Political and Geopolitical spillovers could continue to push lower amidst broad USD weakness and stability of renminbi over the medium term. But over the short term, 1MDB headline consternation and the lack of overt USD selling suggest the USDMYR trades with a bid tone today, however, the pair is unlikely to press the 4.29 level. So far there has been little panic in the markets since Tuesday’s headline (1MDB) as there are  still active  buyers of Malay bonds
None the less, the local market is a bit jittery now but with global equity market trading at records highs and US treasury yields softening overnight, investor anxiety could be short lived.
However I think the MYR and other regional currency appeal is very much a  USD storyline and provided the USD remains weak on a dovish Fed outlook, the MYR should stay in favour. However, a return of US fiscal policy to the headlines or a more aggressive Fed balance sheet initiative will present some serious headwinds to this view.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

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