KUALA LUMPUR – The ringgit may test the psychological level of 4.00 against the US dollar next week amid anticipation for Bank Negara Malaysia (BNM) to maintain the overnight policy rate (OPR) at 1.75% at its meeting on Wednesday.
FXTM market analyst Han Tan said Malaysia’s health-related and economic response amid the ongoing movement control order (MCO), along with the US dollar’s behaviour, are set to be key drivers in determining the US dollar-ringgit performance moving forward.
“For the week ahead, the 4.00 psychological level may beckon once more for the currency pair, while the 50-day simple moving average could be called into action again as the key resistance level in the event of another risk-off episode,” he told Bernama.
The next Monetary Policy Committee (MPC) meeting is scheduled for Wednesday.
Tan said even another 25-basis point cut was not likely to evoke a major response in the ringgit, given the accommodative stance evident among central bankers around the world.
According to him, the European Central Bank and Bank of Japan are unlikely to change their policy settings at their respective January meetings.
“However, markets are poised to react to any potential clues about the eventual adjustments to monetary policy,” Tan said.
On the other hand, Axi chief global market strategist Stephen Innes said that next week might be too soon for the ringgit to test the 4.00 level, given the domestic growth narrative due to the two-week MCO ending January 26.
“So I expect similar range trading with a favourable skew for the ringgit next week,” he said.
For the week just ended, the ringgit traded between 4.0550/0600 and 4.0350/0380 against the greenback.
The local note pared its losses for the week against the US dollar to 4.0350/0380 yesterday following a knee-jerk reaction to Tuesday’s state of emergency declaration.
“The announcement sent the ringgit to breach the 4.07 mark on Tuesday,” said Tan.
Prime Minister Tan Sri Muhyiddin Yassin announced on Monday that a full-scale MCO would be reimplemented in major parts of the country, while on Tuesday the Yang di-Pertuan Agong, proclaimed a state of emergency until August 1 or whenever the Covid-19 situation in the country is under control.
These moves were aimed at containing the spread of the pandemic.
Meanwhile, the local note was also influenced by crude oil prices (benchmark Brent crude price maintained above US$55 (RM222) per barrel), US president-elect Joe Biden’s US$1.9 trillion pandemic stimulus plan and Federal Reserve chair Jerome Powell’s dovish stance on the country’s interest rates.
On a Friday-to-Friday basis, the ringgit slipped slightly lower against the US dollar at 4.0350/0380 versus 4.0300/0340 previously.
The local currency traded mixed against other major currencies.
It appreciated against the Singapore dollar to 3.0386/0418 from 3.0420/0459 a week earlier and firmed versus the euro to 4.8977/9021 from 4.9319/9384 previously.
However, the ringgit fell against the yen to 3.8918/8962 from 3.8813/8863 and weakened vis-a-vis the pound to 5.5029/5086 from 5.4804/4875 previously. – Bernama, January 16, 2021
