Ringgit to trade firmer against US dollar next week

KUALA LUMPUR: The ringgit is likely to remain firm against the US dollar as part of the build up to the highly anticipated Bank Negara Malaysia's (BNM) Overnight Policy Rate (OPR) decision at the end of next week.
Market rumours are rife that the BNM's Monetary Policy Committee (MPC) meeting next week may raise the OPR by 25 basis points (bps) to 3.25% after the hawkish shift in the last meeting.
Technical outlook has indicated more room for the ringgit to improve, with the pair (USD/RM) may challenge a 3.9160 level in the next leg lower, according to Hong Leong Research.
"Caution that a strong but brief weakness may prevail if OPR is hiked and the (MPC) statement turned neutral, otherwise, the ringgit strength is likely to extend into the coming months as markets set sights on future hikes," it said in a note.
Malaysia's stronger trade performance, higher oil prices and weaknesses of the US dollar have helped lift the ringgit after a prolonged period of decline.
FXTM Research shared the greenback was pummelled and pounded by investors on Friday on growing fears of a possible the United States government shutdown over funding issues.
It said sentiment remains bearish towards the US dollar with further downside on the cards, as political uncertainty in the US weighs heavily on the currency.
"From a technical standpoint, the US dollar Index is heavily bearish on the daily charts," it said in a note.
On a Friday-to-Friday basis, the local note finished at 3.9360/9400 against the greenback, the level last seen in July 2016 from 3.9700/9730 the previous week.
On Friday, it advanced 180 pips to an 18-month high as the greenback weakened and traders started pricing in the OPR hike probability next week.
The ringgit was, however, traded mixed against a basket of major currencies.
It advanced against the Singapore dollar to 2.9820/9869 from 2.9895/9924 the previous week and appreciated vis-a-vis the yen to 3.5572/5617 from 3.5727/5761 last week.
The local unit eased against the pound sterling to 5.4742/4801 from 5.4040/4084 last Friday and versus the euro, it slipped to 4.8322/8387 from 4.8128/8181 last Friday.
Besides BNM's MPC meeting in the week ahead, policy meetings of the European Central Bank and Bank of Japan will also be scrutinised, as recent shifts in policy rhetoric from all the three central banks spurred expectations of policy normalisation.
Next week's calendar is also jam-packed with numerous market-moving data, including the US fourth quarter gross domestic product, Markit US services and manufacturing Purchasing Managers' Index, initial jobless claims, home sales, leading index, durable goods orders, and wholesale inventories. — Bernama