Of course there is a relation. If perception is that Malaysia is dependent on oil revenue, and oil prices drop, what does that say about the economy and other fundamentals of the country?

Think about it from an investor point of view. What are you going to do if a country you are investing in, potentially is heading down south and even risks of a sovereign rating cut from the rating agencies?

What happened to the Russia ruble?

Focus on the reason why you made that statement. The other posters are NOT wrong to say that the USDMYR is currently BROADLY co-related (with some deviations, but typically reasons of such would be available only to those in the industry) with oil prices.

When oil price is USD120 per barrel, from an exchange rate regime people just see that there's no issue relating to oil prices for foreign investors to start selling their MGS. If in that scenario, Malaysia handle the increased revenue well, economic data is good, foreign investors flock in thus strengthening MYR.

In short: Strength of the local currency is very much RELATED to oil prices.

This post has been edited by Sesshoumaru: Feb 19 2015, 04:42 AM

You are not focusing on the topic at hand again, rambling on towards 'people gain nothing'. I rarely make notes on the person making the comments, but you called my statement nonsense because you are in a different league from me - a league that does not understand how to discuss intelligently. You also derailed my call on your statement being incorrect into something else entirely because you are unfocused and cluttered in your thinking, equating your own personal experience to everyone elses', including the country and businesses.

My discussion with you ends here.

The day to day pricing of USDMYR is rather interesting to say the least. Since the beginning of this year, it has been mostly volatile. Yes the 1MDB issues does cause some concerns, and it swings because of it. 1MDB loan about to blow up? MYR down. 1MDB repaid? MYR up (but also because AK did the repayment in USD, so there was a MASSIVE sell down of USD in the market. If oil prices come to 40-45, it's possible for it to head towards 3.73, a level seen during the financial crisis period (2009). Something to note: A big portion of the movement in USDMYR so far, is due to offshore funds, with huge amounts of $$$. What's driving the movement of USDMYR is not directly what you and me think about the economy with personal experience (unless you have hundreds of millions of $$$, not me definitely), it is those with money. You exit 1 mio USD? Not a dent in the rate. You exit 100 mio USDMYR? Market will react.

In general, though, the weakening of MYR is not entirely MYR's fault. USD itself has been strong, with hypes over them increasing interest rates in the 2nd half of this year. They are the current big block that is recovering together with the UK, while the rest is still on the south like Europe or Japan (and hence their massive QE). Buying EUR or JPY now, is cheaper then if you were to compare it against it a year ago.

On Indonesia, I'm still going towards hedging Rupiah receivable exposures for Malaysian-based corporate. I have been advising my customers as such for a while now, and still am. Short-term fluctuations are expected, but long term we have seen IDR dipping a whole lot against MYR. I'm lazy to open my Bloomberg now, so this will do.

http://www.xe.com/currencycharts/?from=IDR&to=MYR&view=10Y

Anyways, Happy CNY and Gong Xi Fa Cai all. Spent too much time then I'd like on this anyways. Facing this sort of discussions everyday with my corporate customers is not enough, no, I have to continue this in LYN.

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.

This post has been edited by Sesshoumaru: Feb 19 2015, 09:44 PM

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.