Russia will likely increasingly introduce currency flexibility as inflation drifts higher and the real exchange rate remains undervalued – despite the drift higher in energy. In fact, the move higher in energy prices bolsters the case for further currency flexibility. Likewise, CNY should benefit from large external account surpluses in China, which should provide the authorities with the ability to introduce enhanced currency flexibility.It is still recommended to short USD/MYR as markets were pricing in substantially less MYR appreciation relative to other Asian nation counter-parts earlier in the year. The fundamentals remain relatively favorable for Malaysia with a sizable external account surpluses and the authorities’ ability to permit USD/MYR to drift lower. However, political uncertainty continues to push USD/MYR toward its 200-day MA of 3.2618.
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