Ringgit to skew towards the downside against US dollar next week

KUALA LUMPUR – Bullish expectations for the ringgit would be put on hold next week, with the currency’s movement leaning towards the downside at between 4.42 and 4.44 against the US dollar next week, said an analyst.

SPI Asset Management managing director Stephen Innes said given the hawkish tone of the US Federal Reserve (Fed) and European Central Bank (ECB) to end the week, risk could trade on a wobbly axis next week.

“For the ringgit, where sentiment was buoyed by hopes for, at minimum, an early Fed pause (of interest rate hike) in 2023, it could be negative, especially given the growing uncertainty over China’s reopening with COVID-19 cases skyrocketing,” he told Bernama.

Meanwhile, Kenanga Research, in its Ringgit Weekly Outlook report, said the US Dollar Index may continue to be pressured below the 105.0 level due to the United States’ (US) weaker-than-expected retail sales reading and a hawkish pivot by the ECB.

“Domestically, a stronger trade reading may also help to provide some support to the local note.

“The ringgit may also regain some of its losses if US macroeconomic data continue to point to a decelerating economic momentum,” it said.

Nonetheless, the research firm said the ringgit may continue to trade above the 4.40 level due to the elevated level of uncertainties.

“Technically, the ringgit-US dollar pair’s outlook remains neutral for the week ahead, with the pair likely to hover around its five-day exponential moving average of 4.412 as the pair’s relative strength index is in the middle of the range, indicating that the pair is neither oversold nor overbought.

“As the short-term bias for the pair has remained neutral, the pair is projected to trade in the range of 4.396-4.432 next week,” said Kenanga Research.

For the week just ended, the ringgit mostly weakened against the greenback mainly due to Fed chairman Jerome Powell’s relatively hawkish tone after it downshifted to a 50-basis point rate hike, and the ongoing concern about surging COVID-19 cases in China, which would disrupt its economic activity reopening for the global markets.

The local note was also dragged down by the weaker-than-expected October 2022 Industrial Production Index reading of 4.6 year-on-year, after registering double-digit growth for four consecutive months.

On a week-on-week basis, the ringgit depreciated against the US dollar to 4.4220/4265 on Friday from 4.4010/4080 a week earlier.

The local note was traded mostly higher against a basket of major currencies.

It strengthened against the British pound to 5.3705/3760 from 5.3908/3994 on the previous Friday, marginally rose against the Singapore dollar to 3.2531/2569 from 3.2545/2601, and increased vis-a-vis the Japanese yen to 3.2230/2265 from 3.2315/2369.

However, the ringgit dropped against the euro to 4.6926/6974 from 4.6466/6540 over the seven-day period. – Bernama / pic Bloomberg