Oct 28 (Reuters) - The Malaysian ringgit is likely to enjoy a respite from selling pressure on signs of easing domestic political tensions, but the backdrop remains worrying.
Prime Minister Muhyiddin Yassin, who has faced calls to resign, won a reprieve Tuesday when the largest party in Malaysia's ruling coalition, the United Malays National Organisation (UMNO), declared its support for him . This brief lull in politicking has allowed USD/MYR to hold below its next resistance level of 4.1730-60.
But Muhyiddin's beleaguered government faces a sterner test on Nov 6 when it presents the 2021 budget, its first since assuming power in March. Political analysts are uncertain whether the government can muster enough votes to get the budget through parliament .
With a mere two-seat majority and damaged credibility from a failed attempt to declare a state of emergency , the prime minister may find it difficult to fend off a leadership challenge from opposition leader Anwar Ibrahim. There are also signs that some of UMNO's corruption-tainted leaders, including former PM Najib, are trying to revive their political fortunes .
A northern hemisphere surge in coronavirus cases and U.S. election uncertainty will further limit USD/MYR downside: a break of 4.1760 will lead to a test of 4.2000.
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(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)
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