KUALA LUMPUR – The ringgit is expected to trade in a tight range at the 4.5100-4.5200 level against the greenback ahead of US inflation data in the middle of next week.
Bank Muamalat Malaysia Bhd head of economics and market analysis Mohd Afzanizam Abdul Rashid said “the market will be looking at the US inflation report”.
“Perhaps, the blackout period, which prevents US Federal Open Market Committee (FOMC) members from speaking openly to the general public prior to the meeting date should provide some stability in the currency markets,” he said.
The US consumer price index (CPI) data is due next week before the FOMC meets from March 21 to 22.
SPI Asset Management managing director Stephen Innes said the prospect of a reacceleration in the pace of US Federal Reserve (Fed) hikes has charged back into focus.
“The ringgit direction will depend significantly on whether the incoming US macro data allows the Fed to stick to its current 25 basis points hiking pace, which would mean bad US non-farm payrolls (NFP) and softer inflation data.
“In that case, it could provide some modest relief for Malaysian equities as oil and other commodities rally, especially if upcoming activity data supports China-related optimism, (resulting) in recent US dollar strength to fade,” he added.
Innes said that for now, risks appear skewed towards higher US interest rates and a stronger greenback.
“Yesterday, the trading was relatively quiet, with the ringgit trading defensively ahead of NFP data. My feeling is we are getting to peak Fed as US inflation should continue to fall.
“I think the ringgit could trade better next week heading into China activity data but US economic data needs to help; the ringgit may trade at 4.5050 to 4.5350. But I’m a bit more bullish on the ringgit versus consensus,” he said.
Kenanga Research said the local note is expected to reverse its downtrend and trade marginally stronger against the US dollar if the US CPI trends lower, with the resistance level at 4.4850.
“Conversely, a breach above the 4.5380 level may signal an extension of the bullish US dollar trend,” it added.
The local currency ended the week lower against the US dollar.
On a week-on-week basis, the ringgit was weaker against the US dollar at 4.5180/5220 at yesterday’s close versus 4.4765/4780 a week earlier.
The local note also depreciated against a basket of major currencies compared to a week earlier.
It fell against the British pound at 5.4148/4196 from 5.3642/3660 and shrank versus the Singapore dollar to 3.3316/3351 from 3.3255/3269.
The local unit also eased vis-a-vis the euro to 4.7823/7865 from 4.7487/7503 and dropped against the Japanese yen to 3.3038/3070 from 3.2877/2890. – Bernama, March 11, 2023
