Ringgit set for further appreciation amid cautious outlook on US economic data

KUALA LUMPUR: The ringgit is expected to continue appreciating next week, despite traders remaining cautious about key United States economic indicators, said an analyst.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told BK that several important data points to keep an eye on, including the US ISM index for the manufacturing sector, the Job Openings and Labor Turnover Survey (JOLTS), ADP employment changes, and Nonfarm Payroll (NFP) figures.

He noted that next week will be data-intensive, with traders also monitoring Japan’s Tankan Survey to assess business sentiment among Japanese companies.

“Overall, the ringgit should find stronger support. The immediate support level is at RM4.0728, and it may attempt to reach that level next week,” he said.

SPI Asset Management managing director Stephen Innes said the current rally in the ringgit has extended beyond the usual US-Malaysia interest rate differential and is now being largely driven by China’s stimulus efforts.

He said this puts the currency in a bit of a precarious position, as its strength is increasingly tied to the outlook for China’s economic recovery.

“In the short term, however, I expect the ringgit to stay supported by expectations of further Federal Reserve rate cuts, even though it remains vulnerable to any upward movement in US yields,” he said.

Innes also said next week might be quieter on the local front, with China’s Golden Week dampening regional activity, which means the ringgit will be more sensitive to global factors, particularly the US economic data.

“I anticipate some consolidation, perhaps with a slight weakening bias heading into next week’s NFP report. That said, I do not see the USD/MYR threatening the 4.15 level unless US data significantly surprises to the upside,” he added.

The Malaysian ringgit had strengthened by 1.6 per cent week-on-week against the US dollar. Within six months, the ringgit rose 14.76 per cent against the greenback.

On a Friday-to-Friday basis, the ringgit surged to 4.1230/1280 against the US dollar from 4.2005/2070 a week ago. It touched the 4.12 level on Wednesday, marking its strongest level since June 2021.

Meanwhile, the ringgit was traded higher against other major currencies.

It rose against the euro, closing at 4.6009/6064 from 4.6878/6950 last week, gained against the British pound to 5.5178/5245 from 5.5841/5928, and strengthened vis-a-vis the Japanese yen to 2.8804/8841 from 2.9182/9229 a week earlier.

The ringgit was also traded mostly higher against ASEAN currencies.

It improved vis-a-vis the Singapore dollar to 3.2146/2187 from 3.2507/2559, ticked up against the Indonesian rupiah to 272.5/273.0 from 277.2/277.8 and increased against the Philippine peso to 7.35/7.37 from 7.55/7.56 a week earlier.

The ringgit, however, edged down against the Thai baht to 12.7202/7407 from 12.7026/7288. – BK