Fundamental Overview

▪ Despite Bank Negara Malaysia's back-to-back overnight policy rate hike and European Central Bank's (ECB) unprecedented 75 basis-point interest rate hike, the ringgit continued to weaken against the strengthening USD. The USDMYR pair breached the psychological level of 4.50 for the first time in more than 24 years on September 7, as the USD index soared to above the 110.0 level due to Fed's Powell's hawkish remarks. On top of that, the local note was also pressured by China’s weak trade figures.

▪ However, the ringgit may reverse some of its losses against the USD due to the expectation of a slower US inflation reading in August (consensus: 8.0% YoY; July: 8.5%), coupled with the ongoing ECB’s hawkishness and improving investor’s sentiment as evidenced by a decline in the CBOE volatility index. To add the local note may also benefit from a potential improvement in domestic retail sales and China’s macroeconomic readings.

Technical Analysis

▪ Based on the EMA indicator, the ringgit may appreciate marginally by 0.01% to 4.497 against the USD.

▪ Technical-wise, the bias for the USDMYR pair has turned neutral this week, with the pair projected to trade in the range of (S2) 4.487 – (R2) 4.509. However, the MYR may recoup some of its losses amid a potential recovery in the global risk appetite, pushing the pair back towards the 4.480 zone.

Source: Kenanga Research - 12 Sept 2022