Ringgit set to trade cautiously next week as US debt ceiling deadline looms

KUALA LUMPUR – The ringgit is projected to trade in a narrow range next week as the United States debt ceiling deadline looms on June 1.

SPI Asset Management managing director Stephen Innes noted that the ringgit traded stronger yesterday on a relief rally after some positive developments in the debt ceiling talks, raising hopes that a deal could be reached before June 1.

However, if markets continue to price in a better US growth outlook and more hawkish Fed expectations, then the ringgit would underperform, he said.

“Based on a more hawkish US Federal Reserve (Fed) outlook, we could see the ringgit trading within the 4.59 to 4.61 level next week.

“And if US (economic) data continues to hold up and the debt ceiling deal is signed, this could increase the odds of the Fed hiking (interest rates) in June,” he said.

On Malaysia’s consumer price index (CPI), Innes noted that Malaysia’s inflation moderated to 3.3% in April due to lower food prices, while core inflation, which removes items such as fresh food and energy from the gauge, also fell to 3.6% year-on-year (March: 3.8%).

“So this was good news for the broader economy, hence the ringgit traded better on local impulse,” he added.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the latest CPI showed that the disinflationary trend has continued to prevail.

“Therefore, the overnight policy rate should stick at 3% throughout the year,” he added.

Meanwhile, the local note depreciated versus a basket of major currencies over the seven-day span.

On a Friday-to-Friday basis, the ringgit dropped against the US dollar to 4.5970/6035 compared with 4.5350/5405 a week earlier.

It slipped against the Japanese yen to 3.2918/2967 from 3.2839/2881 previously.

The local note weakened against the British pound to 5.6819/6899 from last Friday’s 5.6370/6438 and went down vis-a-vis the euro to 4.9340/9409 from 4.8978/9037 a week before.

The ringgit also traded lower against its Asean peers.

It slipped against the Thai baht to 13.2539/2784 from 13.1862/2083 and was lower versus the Singapore dollar at 3.4012/4062 from 3.3715/3758 at the end of the preceding week.

The local note eased against the Indonesian rupiah to 307.3/307.9 from 303.6/304.2 last week and weakened vis-a-vis the Philippine peso to 8.24/8.25 from 8.14/8.16 previously. – Bernama, May 27, 2023