Fundamental Overview

• Following a brief uptick below the 4.72/USD level, partly propelled by RM0.5b inflows into the bond market on Monday and bolstered by an enhanced risk sentiment amid People’s Bank of China's efforts to stabilise the yuan, the ringgit weakened again due to the favourable appeal of the USD. The USD index (DXY) received support as investors adjusted their expectations for Fed rate cuts, prompted by the ongoing ambiguity in US data.

• The ringgit has continued to trade above the 4.73 level against the USD, propelled by hawkish comments from Fed Waller and a stronger-than-expected upward revision in the US 4Q23 GDP. These factors have heightened the possibility of the Fed postponing rate cuts. Further bolstering the USD's upward trajectory is S&P's reaffirmation of the US’ AA+ rating, citing economic resilience. Tonight's core PCE data holds significant sway over the USD's trajectory leading up to next week's job report. A reading lower than the current consensus of 0.4% MoM might push the ringgit toward the 4.70/USD mark. With inflation assuming greater importance, a robust job report next week may have minimal impact on the USD. However, markedly weak readings could prompt market reassessment of Fed rate expectations, benefiting risk assets.

Technical Analysis

• The USDMYR outlook for next week remains neutral, anticipated to remain close to its 5-day EMA of 4.731.

• Technically, the pair is expected to fluctuate within the range of (S1) 4.725 to (R1) 4.745. However, shifts in risk sentiment could potentially push the pair below the (S2) 4.716 level.

Source: Kenanga Research - 29 Mar 2024