The ringgit is expected to be traded cautiously versus the US dollar next week

KUALA LUMPUR: The ringgit is expected to trade cautiously against the US dollar next week as traders seek new clues from more substantial economic data.

Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, said market participants would analyse significant data, including US data on the Producer Price Index, Consumer Price Index, and Retail Sales, to strengthen their belief.

“Vice-Chair Philip Jefferson, as well as Federal Open Market Committee (FOMC) members Loretta Mester and Christopher Waller, would be among the Fed officials lined up to give their views.

“I would say the ringgit would (be traded in a) cautious mode and could remain in a narrow range of 4.73 to 4.74 next week,” he stated to Bernama.

He also stated that market participants would be looking at Malaysia’s first quarter GDP (GDP) for 2024 on Friday.

“We are projecting GDP to grow at 4.0 per cent in the first three months of the year due to sustained domestic demand and improvement in global trade,” he stated.

Meanwhile, SPI Asset Management managing director Stephen Innes warned next week’s US inflation data might lead to a large sell-off in the US dollar if it is lower than predicted.

“Conversely, if the data aligns with expectations, it could extend the current US dollar sell-off,” he stated.

Innes said the market appeared to be taking rising indications of a deteriorating US economy as a hint that the Fed could become more dovish, possibly even pricing in a rate decrease as early as July.

“While this outlook shows an exceedingly pessimistic perspective on the US dollar, it is consistent with recent survey data and indicates that the US currency is about to decline.

“As a result, I expect the ringgit to trade with a higher bias next week, assuming US-China tensions do not deteriorate further.

“Speculatively, I think we could test 4.72 next week, but conservatively, I would need to go 4.7350 to 4.7550,” he stated.

The recent weaker-than-expected US Nonfarm Payrolls report and Bank Negara Malaysia’s Monetary Policy Committee (MPC) meeting on May 9, when the central bank opted to hold the Overnight Policy Rate at 3.00 percent, caused the ringgit and other Asean currencies to react this week.

According to AmBank Economics, the ringgit was weak during Thursday’s early session in anticipation of the MPC decision in the afternoon. However, following the meeting, the weak ringgit gave some appeal and caused the US dollar/ringgit to fall to 4.7380.

The ringgit’s subdued response indicates that outside forces—rather than internal ones—are consistently driving the currency’s movement.

“We believe that the ringgit has room to grow beyond its current trading level and may hit 4.50 by the end of the year,” the statement stated.

The ringgit lost value against the US dollar on a Friday-to-Friday basis, falling to 4.7385/7410 from 4.7370/7400 one week earlier.

The ringgit saw a majority of its trades against a major currency basket increase.

Over the course of the week, the local note increased in value relative to the British pound to 5.9364/9395 from 5.9487/9525, increased in value relative to the Japanese yen to 3.0428/0446 from 3.0947/0968, and decreased in value relative to the euro to 5.1072/1098 from 5.0890/0922.

The ringgit generally lost value in relation to Asean currencies.

It increased marginally versus the Singapore dollar to 3.5017/5038 from 3.5027/5054, decreased versus the Thai baht to 12.9009/9137 from 12.8723/8850 on Friday last week, and remained unchanged versus the Philippine peso to 8.25/8.26 from 8.25/8.27 previously.

It also slipped against the Indonesian rupiah to 295.2/295.6 from 294.4/294.8 a week earlier.