Ringgit likely to be traded in cautious mode against US this week; to be traded around 4.73 to 4.74 range

KUALA LUMPUR (Bernama): The ringgit is expected to be traded in a cautious mode against the US dollar this week as traders seek fresh leads from more significant economic data.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said market participants would digest major data, including the United States (US) data on the Producer Price Index, Consumer Price Index and Retail Sales, to build their conviction.

"The US Federal Reserve (Fed) officials lining up to share their views would include Vice-Chair Philip Jefferson and Federal Open Market Committee (FOMC) members Loretta Mester and Christopher Waller.

"I would say the ringgit would (be traded in a) cautious mode and could remain in a narrow range of 4.73 to 4.74,” he told Bernama.

He said market participants would also be looking at Malaysia’s first quarter of 2024 gross domestic product (GDP) on Friday.

"We are projecting GDP to grow at 4.0 per cent in the first three months of the year due to sustained domestic demand and improvement in global trade,” he added.

Meanwhile, SPI Asset Management managing director Stephen Innes said next week's US inflation data could potentially trigger a significant sell-off in the US dollar if it comes in cooler than expected.

"Conversely, if the data aligns with expectations, it could extend the current US dollar sell-off,” he said.

Innes said the market seemed to be interpreting the mounting evidence of a weakening US economy as a sign that the Fed could turn increasingly dovish, possibly even pricing in a rate cut as early as July.

"While this outlook represents an extremely bearish view on the US dollar, it aligns with recent survey data and suggests that the US dollar is poised to weaken.

"Consequently, I anticipate that the ringgit will be traded with a stronger bias next week, assuming the US-China tensions do not escalate further.

"Speculatively, I think we could test 4.72 next week, but conservatively, I would need to go 4.7350 to 4.7550,” he added.

This week, the ringgit, along with other ASEAN currencies, reacted towards the recent weaker-than-expected US Nonfarm Payrolls data and Bank Negara Malaysia’s Monetary Policy Committee (MPC) meeting on May 9, when the central bank decided to maintain the Overnight Policy Rate at 3.00 per cent.

AmBank Economics said in the early session on Thursday, the ringgit was muted ahead of the MPC decision in the afternoon, but post-meeting, the undervalued ringgit provided some allure and pressured the US dollar/ringgit to drop to 4.7380.

"The muted ringgit reaction suggests external factors, rather than the domestic ones, persistently directing the currency’s movement.

"We maintain that the ringgit has more upside than where it is currently trading and could reach 4.50 by year-end,” it said.

On a Friday-to-Friday basis, the ringgit depreciated to 4.7385/7410 versus the greenback from 4.7370/7400 a week earlier.

The ringgit traded mostly higher against a basket of major currencies.

The local note rose against the British pound to 5.9364/9395 from 5.9487/9525 over the week, edged up versus the Japanese yen to 3.0428/0446 from 3.0947/0968, but went down vis-a-vis the euro to 5.1072/1098 from 5.0890/0922 previously.

The ringgit traded mostly lower against Asean currencies.

It was down against the Thai baht to 12.9009/9137 from 12.8723/8850 on Friday last week, slipped against the Indonesian rupiah to 295.2/295.6 from 294.4/294.8 a week earlier, inched up vis-a-vis the Singapore dollar to 3.5017/5038 from 3.5027/5054, and was unchanged versus the Philippine peso to 8.25/8.26 from 8.25/8.27 previously. - Bernama

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