Ringgit sell-off likely to persist


The local currency closed lower for the fifth consecutive week and breached the 4.11 level for the first time since Nov 2020 as the 10-year treasury yield traded above the 1.6% level following US President Joe Biden’s vaccination announcement.

PETALING JAYA: The ringgit sell-off is expected to persist ahead of the US Federal Open Markets Committee (FOMC) meeting this week, according to Kenanga Research. The FOMC meeting is scheduled for today and tomorrow.

The research house said the Federal Reserve (Fed) officials are expected to remain sanguine about the growth outlook and may revise the Summary of Economic Projections upward, a move which could drive the treasury yields higher.

Higher treasury yields analysts said this would attract more investors from emerging markets to the US to reap better yields, resulting in the strengthening of the greenback.

However, Kenanga said the higher oil prices should continue to limit the ringgit depreciation.

As at press time, the ringgit was trading at 4.11 to the US dollar.

The local currency closed lower for the fifth consecutive week and breached the 4.11 level for the first time since Nov 2020 as the 10-year treasury yield traded above the 1.6% level following US President Joe Biden’s vaccination announcement.

To add, weak domestic labour market data for January further weakened the ringgit against a strengthening US dollar last week.

Despite lack of the ringgit’s positive catalyst, Kenanga added that the exponential moving average (EMA) technical indicator projects ringgit to appreciate marginally by 0.24% to 4.109 this week, counting on a potential technical rebound for the local note.

Meanwhile, AmBank Research in a note said it expects the ringgit to trade between its support levels of 4.0855 and 4.0995 while the resistance is pinned at 4.1377 and 4.1598.

On the outlook of the ringgit versus the US dollar, AmBank Group chief economist Anthony Dass told StarBiz that he expects the ringgit to weaken against the dollar in the first half of this year.

“The ringgit is projected to hover around 4.10 - 4.15 to the US dollar, primarily due to the strengthening of the dollar.” At the moment, the local currency is on a weakening trend against other developed markets (euro, aussie, pound) while against the Asean peers its more of a range bound.

Potential outlook will depend on the relative economic performance, vaccination, Covid-19 management and domestic noises.

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