thanks for yr insightful comments, probably the most meaningful to me in this thread so far.

while u hv professional exposure to the subject, my understanding and questions are simply based on what i read and experience in the context of my personal investments. i appreciate u took time to comment, so thanks!

3.73... alright, i'll keep that in mind. i was actually wondering if 3.80 is possible since all the prime factors considered, none of them seem to be working for but only against the rm - oil price, cpo price, budget deficit, debt levels, fdi, mgs yield, consumer confidence, etc...

indon rupiah... i only notice it did badly over the last couple of years (like other emerging markets) but has done well over the last 2-3 months, relative to the mighty usd and rm. it dipped just a few days ago due to int rate cut - that, we know, of course.

which brings me the urge to ask if u see any possibility, any room, for bnm to cut int rates by say 25bps before year end? would consumer spending post-gst, assuming current unfavorable conditions persisting, be weak enough for bnm to cut rates to spur spending again, despite all other "dangers" surrounding such a move? thanks.

3.73 is but a big psychological level in the mind of the market. It represents an invisible 'resistance' which if broken, would open the gateway to further rallying. Most of the factors you mentioned are economic data, and yes the interbank players do watch those, ESPECIALLY data from the US. Key events/data such as FOMC and NFP (Non-farm payroll as a proxy for unemployment) will move the market, typically how it works is this:

1) Market has an expectation before the event, and prices ahead of it
2) Actual data released
3) Market reacts to the data relative to the expectation. Also, to specific statements or keywords. E.g. Market first reacted when Janet Yellen used the word 'patient' when it comes to rate hike

If you do get access to a Bloomberg terminal, go to the page "ECO" to check out market expectations of each upcoming data release.

So let's talk about in Malaysia context. Just several months back analysts were gunning for a rate hike, but the situation has changed quite a bit.

From a broad, fundamental, qualitative perspective - I see rates as strongly neutral on rates (OPR), perhaps leaning towards a rate cut a little. The current oil situation creates a catch-22 for BNM. I increase rates, I kill my domestic spending. I cut rates, I encourage further outflow of funds from Malaysia, weakening MYR even further. The previous MPC in January didn't tell us much except 'continue to monitor the situation', so market is still rather neutral on this.

From a technical, quantitative perspective - MGS yields/Swap rates, KLIBOR, doesn't seem to indicate any consistent, potential rate changes yet [except for KLIBOR 3M, but that is a specific story why there was such a major increase last quarter 2014 but is now dropping. If you truly are interested in the financial world, see if you can google why or get it through your banking contacts]. So, nothing for the time being as well.

Little tip - look at Malaysia Interest Rate Swap rate against KLIBOR, and then look at US Interest Rate Swap rates against LIBOR. You will see a noticeable difference between the 2 sets of data, and that difference signifies the different level of rate expectations between the 2 countries.

again, thanks for yr insights. really appreciate it.

alto i do not hv a bloomberg terminal, i do read bloomberg/cnbc sites all the time. and yes, i am slowly getting to follow the "expectations-actual-reaction" process, esp how hawkish or dovish the fomc minutes/yellen comments will eventually impact markets.

about klibor/interbank rates, again, yes, i noticed... even fd rates start to spring up with all kinds of promotions, which is rather unusual, i find. really... is there some liquidity issue here?

again, appr yr valuable comments. btw, i m not a finance/economics person by training or trade... so, do excuse me if i had used the wrong terms or got certain things grossly wrong! just trying to understand the impt basics better for self help.

Sure, take a look at recent news. http://www.thestar.com.my/Business/Busines...ared/?style=biz

See how they spoke off expectations again (estimated)? It actually applies to other aspects of life, not just financial markets. People buying ahead of GST, why, they expect prices to go up. Insurance premium being charged higher if you are older/smoke/drink etc., why, they expect a higher chance of you claiming.

I'm quite impressed you even noticed how FD rates were increasing and you could give me a keyword - liquidity. Many in my own industry don't even realise KLIBOR 3m and above has been inching up. Let's take it a step further, what was recently introduced in terms of banking compliance, all around the world?

That's okay, not having a background in finance/economics. It applies to all of us, day to day. The time will come where you will be having millions of dollars, and what to do with it will depend on your financial knowledge.

thanks again.

u mean basel3? dunno much about it, but is it voluntary or mandatory in m'sia? so, the rise in short term rates incl fd's was primarily due to some scramble to meet basel3? stabilizing soon?

right... we all hope to be just clever enough not to lose our blood-sweat-tears savings to some crook or bad policies... or worse, wrong understanding!

not forgetting russia also started to increase oil production & giving discount to Asian buyers 

Well, their oil I guess only the Japs and China dare to take. European countries unlikely because of MH17 case

both China & Japan is among the world biggest buyer 

Little respite for the ringgit
Monday, 23 February 2015
BY: IZWAN IDRIS

PETALING JAYA: Cheap airfare is a boon for holidaymakers going overseas, but Malaysians can’t help but feel a little short-changed after a trip to money changers.

Take the Thai baht, which had advanced 13.2% over the past six months. At 8.93 last week, the baht is at its most expensive against the ringgit since 2007.

Jakarta would have been a cheaper destination, currency wise, as the rupiah performance was tempered by Bank Indonesia’s unexpected interest rate cut last Tuesday. At current exchange rate, you can get around 3,500 rupiah for one ringgit. Six months ago, one ringgit will buy you 3,650 rupiah.

Hong Kong, a favourite shopping destination for many Malaysian, has become 15% more expensive since August last year. The Hong Kong dollar is pegged to the US dollar, against which the ringgit had weakened to 3.647 on Wednesday, before the market closed for the Chinese New year holidays.

At that level, the ringgit was at a five-year low against the greenback. CIMB Research said the ringgit was likely to hold above 3.70 against the US dollar.

And unlike during the 1990’s financial crisis, Malaysia’s economy continues to be resilient, despite falling oil prices and a surge of foreign outflow.

Bank Negara will release its mid-monthly foreign exchange reserves report later this week, which would probably show another decline. But with more than US$100bil in foreign exchange stockpile, the central bank has the firepower to keep currency speculators at bay.

Analysts, however, expect little respite for the ringgit this year, as the US Federal Reserve moves ever closer towards raising interest rate for the first time in almost a decade.

Meanwhile, a growing number of central banks is cutting interest rates and watching their currencies fall against the strong US dollar.

Indonesia was the most recent among Asian countries to lower its domestic interest rate. Singapore in January loosen its monetary policy to keep its currency low.

China and India have already lowered their rates. Analysts believe Thailand might also jump on the easing bandwagon soon.

The baht, compared with the weak ringgit, had been surprisingly strong, easing just 1.3% against the US dollar over the same six month period.

It has been one of Asia’s best performing currencies, despite a military coup last year and weak growth that normally scare away investors. A factor that is helping the Thai economy is plunging crude oil prices.

This is a contrast compared with Malaysia, which is viewed as oil-based economy. Petroleum income makes up about a third of the Government’s annual budget revenue.

The Government, in January, was forced to review its spending for this year to keep the target of gradually reducing the country’s budget deficit intact, as the sliding crude oil hurt revenue.

As the ringgit performance is locked to oil prices, expect more volatility ahead.

As it is, the turmoil in the currency market has pushed up the cost of overseas holiday and the price of imported goods for Malaysians. But some economists reckon that the cheaper ringgit is not all that bad.

The weaker ringgit, driven largely by falling price of crude oil, might help buffer the economy from job losses and a slowdown in growth.

Palm oil producers, which are enjoying a relatively stable price of crude palm oil in the international market, are effectively given the boost from the weak ringgit.

Other exporters, like manufacturer of rubber gloves, are also prime beneficiaries.
http://www.thestar.com.my/Business/Busines...ggit/?style=biz

Ringgit under pressure over 1MDB debt
http://www.themalaysianinsider.com/busines...-over-1mdb-debt

today:
oil usd54, usd1=rm 3.595.

maybe too early to say, but is rm now getting weaker despite oil some price recovery?

3.73 is but a big psychological level in the mind of the market. It represents an invisible 'resistance' which if broken, would open the gateway to further rallying. Most of the factors you mentioned are economic data, and yes the interbank players do watch those, ESPECIALLY data from the US. Key events/data such as FOMC and NFP (Non-farm payroll as a proxy for unemployment) will move the market, typically how it works is this:

U.S. oil output could start to take a hit by late 2015, OPEC said on Monday, suggesting the exporter group will have to wait beyond its next meeting in June to see if the oil price collapse is beginning to dent the shale oil boom.

OPEC holds its next meeting in June and comments from OPEC officials so far suggest it will not adjust its output policy at the meeting as it waits for the strategy to take effect.

For now, OPEC forecast no further rise in demand for its crude in 2015, trimming the forecast slightly to 29.19 million bpd, and left unchanged its estimate of global growth in oil demand this year.

All I can say is the Brent crude oil is narrowing its gap with the US crude. The US crude did not suffered as much because the rig count in the states is still reducing every week.

But i dont know how long the US crude can last when OPEC and its cartel is going to keep pumping at this rate and amount. I would predict soon it will hit the US crude.