Fundamental Overview

▪ MYR shed all of its gains against the USD, mainly due to the lack of pro-ringgit catalysts and deteriorating global economic prospects. The USD index was trading around the 108.7-109.7 level due to the Fed’s Powell hawkish rhetoric and Europe’s worsening energy crisis. On top of the continuation of safe haven-flows into the USD, the ringgit was dragged down by the persistent weakness in the yuan (around 6.90 per USD) as China extended its lockdown in the city of Chengdu.

▪ Despite solid US jobs report and market expectations of another 75 basis points (bps) interest rate hike by the Fed, the local note is expected to trade stronger around the 4.47-4.48 level against the USD. The ringgit is seen to benefit from the Bank Negara Malaysia’s potential 25 bps overnight policy rate hike and European Central Bank’s widely anticipated 75 bps interest rate hike. However, a potential slowdown in China’s exports may weigh on the yuan, exerting downward pressure on the ringgit.

Technical Analysis

▪ 5-day EMA indicator suggests that the MYR may strengthen slightly by 0.10% against the USD.

▪ The short-term technical outlook indicates that the USDMYR pair may test the immediate support area at (S1) 4.478. On the downside, the bearish USD scenario may no longer hold if the pair jumps towards the (R1) 4.492 resistance level.

Source: Kenanga Research - 5 Sept 2022