Ringgit Influenced By External Dynamics With Limited Domestic Catalysts
The week began with the Ringgit initially softening following robust US Non-Farm Payroll (NFP) data, which dampened expectations for immediate Federal Reserve interest rate cuts and boosted the USD on firmer yields. However, the Ringgit soon regained ground as positive US-China trade discussions improved broader risk sentiment. Subsequently, softer US Consumer Price Index (CPI) figures shifted the market narrative towards a more dovish outlook for the Fed, reinforcing expectations of easing monetary policy and pushing the DXY (US Dollar Index) below the 98.0 level.
Despite robust US Treasury auctions, the US Dollar remained subdued, suggesting that domestic demand, rather than foreign appetite, was the primary driver of any strength. This trend, according to Kenanga Research, lends some weight to the ongoing de-dollarisation narrative.
Looking ahead, market participants will keenly watch next week's US retail sales data, which is expected to contract by 0.7% month-on-month, ahead of the Federal Open Market Committee (FOMC) meeting. While the Fed fund rates are widely anticipated to remain unchanged, any dovish tone from the Fed could put further downward pressure on the US Dollar.
Kenanga Research projects that rising Brent crude oil prices amid Israel-Iran tensions might offer some temporary support to the US Dollar, but the broader trend is still seen favoring a weaker greenback. For the upcoming week, the Ringgit is expected to trade around its current level as markets monitor developments in US-China trade talks and the Israel-Iran conflict. The upcoming release of US Treasury data on foreign holdings will also be scrutinised for any signs that a 'Sell America' trend is gaining traction among international investors.
Technically, the USDMYR remains neutral, hovering around its 5-day Exponential Moving Average (EMA) of 4.23. Near-term movements are expected to hinge on external factors, with initial support identified at 4.23 (S1) and resistance at 4.25 (R1). Related
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