KUALA LUMPUR, Sept 18 (Bernama): The ringgit is likely to stabilise against the US dollar next week, driven by a bullish outlook on the global financial market, with the focus on the United States Federal Reserve (Fed), said an economist.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said after experiencing a sharp appreciation, the ringgit succumbed to the selling pressure during this week, which could have been motivated by profit-taking activities in light of the rapid increase in the value of the ringgit.
"Next week, the US dollar/ringgit should stabilise around the prevailing level as investors will take a cue from the US Federal Open Market Committee (FOMC) meeting on Sept 21 and 22.
"Investor will be looking for clues at how the Fed would assess the recent data, particularly retail sales during August which had surpassed market consensus of 0.8 per cent contraction when the actual outturn saw retail sales growing positively by 0.7 per cent month-on-month,” he told Bernama.
Meanwhile, a dealer said the strong economic data from the world’s largest economy would provide an extra cushion to the greenback at the end of the week.
"This has great potential to cause the US dollar to appreciate over the next few days, as high consumer spending could signal to the Fed that it will have to cut financial stimulus, which currently stands at US$120 billion per month, sooner than expected,” he said.
He said the Fed is widely expected to announce the tapering of its asset purchases during the FOMC two-day meeting, following firmer US data.
From a technical point of view, he said if the US dollar-ringgit pair broke above the 4.1600 level, it could rise to 4.2300 in a few days.
On a weekly basis, the ringgit weakened to 4.1700/1730 against the greenback on Friday from 4.1340/1370 a week ago.
The ringgit also traded lower against other major currencies compared to a week earlier.
It was slightly lower against the Singapore dollar at 3.0985/1010 from 3.0867/0892 a week before and declined against the British pound to 5.7483/7525 from 5.7347/7388.
The local note also slipped against the euro to 4.9135/9170 from 4.8934/8970 and depreciated on the Japanese yen to 3.7913/7943 from 3.7592/7623 on the previous Friday. - Bernama