Fundamental Overview

• The ringgit traded relatively weak, around the 4.76-4.78 level in the first three days of the week before strengthening to 4.74/USD on Thursday. The local currency faced initial pressure due to a downturn in investors' risk appetite amid market's ongoing downward recalibration of Fed interest rate expectations. Nevertheless, joint efforts by the government and BNM to increase inflows into the domestic FX market have somewhat helped to boost the ringgit, not only against the USD but also against its ASEAN-5 peers. Additionally, this week saw net foreign inflows of RM0.15b into the domestic debt, driven by an influx of investment in corporate bonds.

• Even though the US core PCE recorded a hot 0.4% MoM (Dec: 0.1%) reading, cooling personal spending may continue to support disinflation and reduce aggregate demand, setting the stage for a potential Fed pivot towards easing in June. This, coupled with BNM's and the government's efforts to boost the appeal of the ringgit, along with our expectation of a status quo in the OPR next week, may support the ringgit to trade around the 4.73/USD level. Next week, the spotlight would once again shift to US jobs data, and any indications of weakness are likely to contribute to a weakening USD and an increase in demand for risk assets.

Technical Analysis

• The USDMYR is expected to turn neutral-to-bullish next week as its RSI is nearing an oversold territory (See ST Technical table).

• Technically, MYR is expected to trade lower against the USD next week, with the pair’s immediate resistance level at (R1) 4.764.

Source: Kenanga Research - 1 Mar 2024