Greenback-ringgit trajectory very much depends on the outcome of the NFP, says analyst

By NUR HANANI AZMAN / Pic By MUHD AMIN NAHARUL

THE US dollar is set to benefit from rising US Treasury yields and strong economic recovery in the US, which could keep the ringgit trapped between RM4.14 and RM4.15 against the US dollar this week.

Better employment outlook will be gauged through the latest US non-farm payrolls (NFP).

“If the NFP comes stronger, we believe the value of the US dollar will rise as the anticipation of the US Federal Reserve tapers down their policy accommodation in the near future will gain further credence,” Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told The Malaysian Reserve (TMR).

NFP measures the amount of jobs that aren’t farm related gained in the US. It is a monthly report from the US Labour Department that can have a substantial impact on foreign-exchange (forex) markets.

AxiCorp Financial Services Pte Ltd chief global market strategist Stephen Innes believes the greenback-ringgit trajectory very much depends on the outcome of the NFP.

“I think the US dollar has priced in a high level of US economic optimism, so I think, with oil markets stabilising and the expectation the furious rise in yields will abate, the ringgit could trade marginally better,” he forecast.

On Bank Negara Malaysia’s (BNM) further measures to liberalise forex policy, Innes said they could help but still couldn’t meet expectations for foreign bondholders to hedge currency exposure related to bond purchase.

“For that at minimum, we need a non-deliverable forward market. But it helps exporters,” he added.

On March 31, BNM announced the forex policy to strengthen Malaysia’s position in the global supply chain and foster a conducive environment in attracting foreign direct investments into the country.

According to the central bank, the measures will provide greater flexibility for export-oriented industries to better support Malaysia’s economic recovery.

“These measures will be effective from April 15, with further details to be provided in the revised Foreign Exchange Notice 4 to be issued by BNM then.

“One of the new measures is the removal of the export conversion rule. This means that resident exporters may now manage the conversion of export proceeds according to their foreign currency cashflow needs,” it said in a statement.

BNM said resident exporters can settle domestic trade in foreign currency with other residents involved in the global supply chain.

“Recognising Malaysian exporters’ vital position in the global supply chain, this measure will facilitate natural hedge for resident exporters and their business partners along the supply chain to better manage the forex risk,” it explained.

Mohd Afzanizam sees the recent measures will allow better price discovery mechanisms to take place, given that there will be more flexibility on how businesses could manage their forex exposures.

“So, the value of ringgit will reflect the state of the economy,” he said.