Fundamental Overview

▪ Despite rising demand for safe-haven assets (i.e. USD, gold) amid the ongoing Russia-Ukraine war, the ringgit appreciated by 0.58% (largest in seven weeks) against the USD, mainly due to a 20.6% surge in Brent crude oil price and BNM’s OPR status quo. The local note managed to outpace the strong USD uptrend despite the current risk-off environment, better-than-expected ADP employment report and Fed Powell's hawkish speech.

▪ The USDMYR pair is expected to trade between 4.180 to 4.190 this week as the USD index climbed to above the 98.0 level (March 3) for the first time since May 2020 due to the exceptionally strong US jobs report. To add, an expected 7.9% YoY increase in US CPI in February, coupled with the ongoing geopolitical uncertainties in the Eastern Europe may continue to limit ringgit appreciation despite elevated crude oil prices.

Technical Analysis

▪ MYR is expected to weaken slightly by 0.24% against the USD to 4.188 as signalled by the 5-day EMA for this week.

▪ Based on our technical analysis, the USD may test the pair’s upside at (R1) 4.192 and potentially hit the (R2) 4.206 level if US inflation rate surge by more-than-expected and if the RussiaUkraine crisis worsens. Conversely, a potential downside could tilt the pair towards the (S1) 4.171 and (S2) 4.163 support level.

Source: Kenanga Research - 7 Mar 2022