Fundamental Overview

• Despite the unexpectedly robust nonfarm payroll and the hotter- than-expected US core inflation readings, the ringgit traded stronger, hovering around the 4.678 - 4.686 level against the USD from Monday to Thursday. The USD index (DXY) did not surge as it had in last month’s above-consensus release, possibly due to the ambiguous nature of the job report. The ringgit's resilience can partly be attributed to strong domestic readings (i.e. IPI), signalling brighter growth prospects for Malaysia. Additionally, government efforts to repatriate foreign investment income and interventions by the BNM could also be supporting the strength of the ringgit.

• The ringgit is currently back above the 4.70/USD threshold, propelled by both the DXY and the 10-year US Treasury edging higher. This surge comes amid escalating uncertainty over Fed rate cut expectations, fuelled by key US data such as the PPI. As the market braces for the upcoming FOMC meeting, the allure of the safe-haven USD may persist, particularly in light of the US economy's persistent resilience. Unless clear indicators of an imminent downturn emerge, USD bears may remain in hibernation, particularly with expectations that the Bank of Japan may defer any significant moves until April, rather than acting next week. However, potential support for the ringgit could materialise if China's key data releases and Malaysia's trade figures exceed expectations.

Technical Analysis

• The USDMYR outlook is neutral next week, with the pair expected to hover around its 5-day EMA of 4.695.

• Technically, the pair may trade in the range of (S1) 4.687 – (R1) 4.713. However, higher demand for USD may weaken the MYR.

Source: Kenanga Research - 15 Mar 2024