KUALA LUMPUR: The ringgit is likely to trade below the 4.15 level against the US dollar next week, tracking other Asian currencies in benefiting from the weaker greenback amid expectations of an interest rate cut by the US Federal Reserve (Fed).
FXTM market analyst Han Tan said further weakness in the US dollar due to the anticipation of a Fed rate reduction could alleviate the pressure on Asian currencies, including the ringgit, in the week ahead, hence allowing the local note to trade below the 4.15 level against the greenback.
“Should the US economic indicators in the week ahead point to soft patches in the world’s largest economy, that could fuel expectations for a Fed rate cut over the coming months while opening up more downside for the greenback,“ he told Bernama.
The US will release its Consumer Price Index (CPI) data for May 2019 on June 12 and its weekly initial jobless claims report on June 13, while China will also announce its trade data for May 2019 on June 10, and its May 2019 CPI data on June 12.
According to Tan, China’s data releases in the coming days could also buffer the performances of regional currencies, in the event that China’s economic resilience outshone the heightened trade tensions with the US.
“Market risk sentiment is expected to remain impeded by the already heightened barriers to global trade, which threaten to further dampen the world’s economic outlook for 2019 and beyond.
“Therefore, for the week ahead, the ringgit’s exposure to external factors will remain in focus,“ he added.
Meanwhile, Vanguard Markets managing partner Steve Innes said although the ringgit had been supported by the markets which aggressively priced in Fed rate cuts for the week just ended, the local unit would still be the biggest casualty of the escalating US-China trade tension given Malaysia’s strong trade ties with China.
“With US President Donald Trump threatening to implement more tariffs, the US dollar-ringgit floor should remain in check despite an apparent dovish shift from the Fed,“ he said.
For the holiday-shortened week, the ringgit was traded higher versus the greenback, mainly attributable to the surprising trade data which saw April’s exports rose 1.1% year-on-year to RM85.2 billion, coupled with the weakening greenback.
The market was closed on June 5-6 for the Hari Raya Aidilfitri holidays.
On a Friday-to-Friday basis, the ringgit strengthened to 4.1570/1620 against the US dollar from 4.1890/1920 previously.
It traded mixed against other major currencies.
The local unit fared slightly better against the Singapore dollar at 3.0396/0444 from 3.0399/0432 at last Friday’s close, and advanced to 3.8275/8331 from 3.8512/8544 versus the yen.
However, vis-a-vis the pound, it declined to 5.2844/2924 from 5.2693/2748, and depreciated against the euro to 4.6787/6860 from 4.6703/6741 previously. — Bernama
