KUALA LUMPUR, Aug 15 — The ringgit is expected to trade between the 4.16-4.23 level against the US dollar next week.
FXTM market analyst Han Tan said with the ringgit still slightly overbought against the greenback, a pullback in the week ahead above the 4.20 psychological level could call upon US dollar-ringgit 200-day simple moving average (SMA) to act as the resistance level around the 4.23 mark.
“A break below its 4.18-4.20 month-to-date range could see the currency pair aiming for its 4.16 support level, which was last tested in March,” he told Bernama.
Meanwhile, Tan said the Dollar Index (DXY) has kept to the 92.5-94 range so far in August, with the ringgit’s one per cent month-to-date gain, making it Asia’s best performer for the period.
“The greenback has been weakened by expectations of faster US inflation eroding the US dollar’s purchasing power, with real yields on the 10-year US Treasuries falling to minus one per cent.
“Should the release of the Federal Open Market Committee (FOMC) minutes on Aug 19, 2020 alter the US inflation outlook, that could prompt the DXY to break out of its month-to-date range,” he said.
The DXY is a measure of the value of the US dollar relative to a basket of foreign currencies.
Moving forward next week, Tan said investors would be on the lookout for developments surrounding the US-China trade talks slated for Aug 15, 2020 .
“Markets will also be keeping an eye on whether the stalemate surrounding the next round of US fiscal stimulus can be broken, even though the better-than-expected economic data of late could buy Congress more time,” he said.
Should these events produce dollar-negative developments, Tan said that might prompt Asian currencies, including the ringgit, to explore more of their respective upside against the greenback.
Over the past week, Tan said the ringgit mostly remained on the stronger side of 4.20 against the greenback, despite Malaysia’s deeper-than-expected gross domestic product performance for the second quarter of 2020 which contracted 17.1 per cent.
“However, the more recent economic data indicates that the worst of the COVID-19 pandemic’s impact on the economy is now in the rear-view mirror and that the recovery is underway.
“This was judging by the Markit manufacturing Purchasing Managers’ Index’s (PMI) return to expansion in June and July, while exports and manufacturing sales resumed their respective year-on-year growth in June,” he said.
He expressed optimism that the monetary and fiscal support measures that had been rolled out would continue aiding the country’s journey into the post-pandemic era, although downside risks still loom for the global economy.
On a Friday-to-Friday basis, the ringgit fell 80 basis points against the greenback to close at 4.1910/1950 on Friday from 4.1830/1900 in the previous week.
However, the local note was traded mixed with major currencies.
It rose against the yen to 3.9260/9308 from 3.9589/9667 a week earlier, and was slightly higher against the euro at 4.9416/9472 from 4.9426/9517 previously.
Vis-a-vis the Singapore dollar, the local unit slid to 3.0518/0554 from 3.0499/0562 while against the pound, it eased to 5.4785/4854 from 5.4755/4864 previously.
