PETALING JAYA: The ringgit may test the psychological level of 4.00 against the US dollar next week amid anticipation that Bank Negara would maintain the overnight policy rate 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 2.0), along with the US dollar’s behaviour, were 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 once more as the key resistance level in the event of another risk-off episode, ” he told Bernama.
The next Monetary Policy Committee meeting is scheduled for Jan 20.
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 the 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 opined that next week might be too soon for the ringgit to test the 4.0-level, given the domestic growth narrative due to the two-week MCO 2.0 ending Jan 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 was 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 on Friday, following a knee-jerk reaction to last Tuesday’s state of emergency declaration.
“The announcement sent the ringgit to breach the 4.07-mark on Tuesday, ” said Tan.
Prime Minister Muhyiddin Yassin announced on Monday that a full-scale MCO restriction order would be reimplemented in major parts of the country, while on Tuesday the Yang di-Pertuan Agong proclaimed a state of emergency until Aug 1 or when Covid-19 came under control.
The moves were aimed at containing the spread of the pandemic.
Meanwhile, the local note was also influenced by crude oil prices (the benchmark Brent crude price maintained above US$55 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. ─ Bernama