Morgan Stanley closes long MYR/INR, recommends selling EUR/ZAR

Morgan Stanley closes long MYR/INR, recommends selling EUR/ZAR
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SINGAPORE (May 4): The unexpected strength of the Indian rupee and the weakness of the Malaysian ringgit pushed the long 3m NDF MYR/INR trade to its stop, Morgan Stanley strategists led by Hans Redeker write in a report Thursday.

* MYR: Trade was entered on Feb. 12; co. retains bullish stance on MYR and bearish stance on INR but remain on the sidelines on the MYR given the current halt in the oil rally

* INR: Co. remains a seller of INR through short INR/IDR position

* ZAR: Technical selloff on South African rand should be taken as an opportunity to add to longs on the currency; trade is paired with EUR as co. expects EUR to continue to trade weakly vs USD

** Recent underperformance in ZAR was fueled by broad selloff in EM; South Africa is having a structural recovery driven by consumption and investments

* TRY: Co. closes short USD/TRY trade entered on April 19; co. expected the Turkish lira to stabilize with the central bank’s recent rate hike, but the negative news flow such as the S&P rating downgrade and higher CPI kept Turkish assets under pressure

* RUB: Co. also closes long USD/RUB trade entered on April 23 as there has already been a large adjustment in positioning and the risk-reward looks attractive at current levels

** Russian ruble still looks vulnerable after recent sanctions; seasonally weak current account and continued Finance Ministry USD purchases should weigh on RUB

* READ: Here’s One Sign Favoring Emerging-Market Currencies Amid Selloff