KUALA LUMPUR, Sept 12 (Bernama) — The ringgit is likely to strengthen against the US dollar next week on improved appetite for the domestic currency after Bank Negara Malaysia (BNM) maintained the overnight policy rate at 1.75 per cent on Thursday.
FXTM market analyst Han Tan said BNM’s decision to keep benchmark interest rate unchanged underscored the belief that Malaysia’s economic recovery was truly underway.
“Such a narrative may have bolstered sentiment for the ringgit since the central bank’s policy decision, with the domestic unit being Asia’s best performer against the US dollar over the past two days (Thursday and Friday), despite Brent futures sinking back below the psychologically-important US$40 per barrel mark.
“However, policymakers did highlight that the road ahead still poses ‘downside risks and uncertainty’ and interest rates may have to ease further if the recovery momentum stalls,” he told Bernama.
Tan noted that further US dollar weakness might bring the currency pair to retest the month-to-date low of 4.1343.
“To the upside, US dollar/ringgit’s immediate resistance line can be drawn at 4.1683, with stronger resistance set to arrive at 4.1763, having already proved its worth earlier this week,” he added.
In keeping with the central bank theme, the US Federal Reserve, Bank of England and the Bank of Japan are set to make their respective policy decisions in the week ahead.
AxiCorp chief global market strategist Stephen Innes said the ringgit had outperformed in the current quarter to-date, alongside the Chinese yuan, but the ringgit strength was extended.
“While the ringgit is still cheap and enjoys a yield advantage, the slippery slope for oil prices notwithstanding, the not-so-small matter of the World Government Bond Index (decision) by FTSE Russell will occur later this month,” he added.
For the week just ended, the ringgit pared losses against the greenback from the first half of the week to end the period closer to the 4.15 psychological level, as Asian currencies posted a mixed bag of results against the US dollar.
On a Friday-to-Friday basis, the ringgit eased against the US dollar to 4.1510/1550 from 4.1470/1520 in the previous week.
The ringgit traded higher against the Singapore dollar to 3.0384/0420 from 3.0410/0458 last Friday but fell versus the yen to 3.9076/9124 from 3.9042/9100 previously.
The local unit climbed vis-a-vis the British pound to 5.3104/3167 from 5.5143/5213 and depreciated against the euro to 4.9281/9332 from 4.9150/9214.
