Fundamental Overview

• As expected, strong demand for the USD due to uncertainty about the Fed's outlook has bolstered the DXY within a 103.4 to 104.0 range, keeping the ringgit weak above 4.70/USD. Following the FOMC meeting, the ringgit recovered some losses, helped by Fed Chairman Powell's remarks, which were interpreted as dovish. Despite the pivotal decision by the BoJ to end its negative interest rate policy and stronger-than-expected China’s IPI and retail sales data, the ringgit surprisingly did not strengthen. Also, disappointing export growth domestically has further weighed on the currency.

• Meanwhile, the unexpected 25 bps rate cut by the Swiss National Bank yesterday has significantly weakened the CHF. This, combined with the Bank of England's dovish shift and robust US Manufacturing PMI data, has propelled the DXY higher, consequently weakening the ringgit. Next week’s lack of catalysts may tether the ringgit's movement against the USD. However, anticipated fund inflows into emerging markets, particularly into Malaysia, due to speculation of a Fed pivot in June and the nation's relative stability, might aid the ringgit’s recovery. Additionally, continuous government and BNM efforts to boost the ringgit's value through short- and long-term policy reforms could support its stability. Market attention will be on the US Core PCE data on Friday.

Technical Analysis

• The USDMYR outlook for next week is neutral, with expectations for the pair expected to stay close to its 5-day EMA of 4.725.

• Technically, the pair may fluctuate between within the range of (S1) 4.722 – (R1) 4.744. However, weakening USD could lead the pair towards 4.700.

Source: Kenanga Research - 22 Mar 2024