Ringgit set to continue bullish bias vs US dollar next week

KUALA LUMPUR: The ringgit is anticipated to move on a continued bullish bias next week, trading at 4.1875 to 4.2025 against the US dollar, said an analyst.

SPI Asset Management managing director Stephen Innes said massive moves on the ringgit in the past week reminded markets just how deeply undervalued the local unit was, held back by higher United States short-term rates.

“It is as if the jumbo Fed cut opened the bullish floodgates, sending the ringgit surging. But, of course, there’s always more beneath the surface.

“The Fed’s jumbo rate cut is a game-changer, boosting local foreign exchange (FX) markets and lighting a fire under the local stock market, drawing in foreign inflows in a virtuous cycle for a stronger ringgit,” Innes told BK.

He further said while the US economic data has held up for now, he expects that it (the US economy) would eventually soften, leading to an even more aggressive repricing of the US yield curve lower, which would benefit the ringgit even further.

“In this environment, any US dollar strength will likely be short-lived, quickly snuffed out by the prospect of more Fed cuts.

“But given how far and fast we have come, I wouldn’t be surprised to see some consolidation next week, around 4.20. I am expecting a range of 4.1875 to 4.2025, with a continued bullish bias,” said Innes.

Meanwhile, Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour said besides the US rate cut, Malaysia’s positive economic outlook and structural reforms were also propelling the ringgit’s rise.

“The ringgit’s recent recovery is driven by the shift in expectations of lower interest rates in major economies, particularly the US, as well as Malaysia’s strong economic performance,” he said.

The US Federal Reserve’s (Fed) recent decision to slash interest rates has significantly impacted the ringgit, especially in light of shifting currency dynamics across the region.

The American central bank’s move to slash 50 basis points on Wednesday, the first in four years, has loosened tight monetary policies and injected confidence in weakening currencies, say analysts.

The local note closed at 4.2005/2070 against the greenback on Friday (Sept 20).

Within six months, the ringgit rose 12.67 per cent against the US dollar.

On a Friday-to-Friday basis, the ringgit surged to 4.2005/2070 against the US dollar from 4.2975/3050 a week ago.

The local currency traded higher against other major currencies.

It rose against the euro, closing at 4.6878/6950 from 4.7664/7747 last week, gained against the British pound to 5.5841/5928 versus 5.6439/6538, and strengthened vis-a-vis the Japanese yen to 2.9182/9229 from 3.0570/0625 a week earlier.

The ringgit traded higher against ASEAN currencies.

It improved vis-a-vis the Singapore dollar to 3.2507/2559 from 3.3098/3159 and ticked up against the Indonesian rupiah to 277.2/277.8 from 278.9/279.6 previously.

The ringgit perked up against the Thai baht to 12.7026/7288 from 12.8907/9190 and increased against the Philippine peso to 7.55/7.56 from 7.67/7.69 a week earlier. – BK