Bias: The MYR/AUD pair is currently bullish-to-range-bound, as it is above the 90-day average and in the upper half of its 3-month range.
Key drivers:
• Rate gap: The Bank Negara Malaysia is maintaining a steady stance on rates, while the Reserve Bank of Australia is hinting at potential rate hikes, which supports the MYR against the AUD.
• Risk/commodities: With oil prices above average, this trend is beneficial for the Malaysian economy, bolstering the MYR through increased export revenue.
• Macro factor: China's subdued inflation has raised concerns about demand for Australian exports, particularly impacting the AUD’s performance negatively.
Range: The MYR/AUD is likely to drift within its recent stable range as both currencies respond to external pressures while testing close limits.
What could change it:
• Upside risk: A surprising rebound in Chinese economic data could enhance demand for AUD and lift its value.
• Downside risk: Any aggressive actions from the RBA regarding interest rates may lead to a stronger AUD, undermining current MYR gains.