KUALA LUMPUR – External concerns will continue to play a big role in determining the direction of the ringgit next week, with investors keeping a close eye on developments in the United States.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said talks of a possible US quantitative easing tapering resurfaces every now and then to influence the foreign exchange (forex) market to remain volatile in the near future.
“Expect the US dollar/ringgit to trade in a narrow range of between RM4.15 and RM4.16 next week,” he said.
He said that markets will be looking at business sentiment indicators, such as the US Institute of Supply Management Manufacturing Purchasing Managers Index (PMI) for manufacturing, which is expected to be around 61 points for June from 61.2 points in May.
“Employment figures will also be in the spotlight such as the Nonfarm Payroll (NFP), which is expected to be higher this month as compared with last month. Meanwhile, the unemployment rate will likely go down further to 5.7% in June from 5.8% in the preceding month,” he said.
Echoing similar sentiment, OANDA Asia Pacific senior market analyst Jeffrey Halley said currency markets will continue to range with a gentle bias towards US dollar strength.
“With one eye on next week’s PMIs from Asia and the US NFP, currency markets will continue to trade sideways with the US dollar quietly consolidating the previous week’s gains,” he said.
For the week just ended, US dollar and Asian currencies have not corrected lower this week to any notable degree, with the ringgit, Thai baht and Indonesian rupiah posting almost no gains at all, although the Korean won and the Philippine peso have made up some lost ground.
“The post inflation scare bounce has been reflected in modestly stronger developed market currencies and not emerging market currencies.
"That suggests that markets remain concerned about the low being in place for US rates and further US dollar strength. I do not disagree with this premise at all and next week’s US NFP figures may answer that question for us,” he added.
Meanwhile, the ringgit traded mostly weaker against other major currencies.
Against the Singapore dollar, the local unit fell to 3.0964/0980 from 3.0851/0875 a week earlier, the local note eased against the British pound to 5.7781/7802 from 5.7526/7568, and against the euro, it depreciated to 4.9627/9645 from 4.9308/9344 in the preceding week.
However, versus the yen, it rose to 3.7526/7540 from 3.7570/7598 previously. – Bernama, June 26, 2021
