Fundamental Overview

• The ringgit once again traded close to the psychological threshold of 4.800/USD, nearly breaching its all-time low of 4.799/USD recorded in February. Strong US data, particularly inflation and retail sales, along with hawkish comments from Fed Chair Powell, have heightened expectations of a delay in the Fed's policy shift. The risk- off sentiment was further exacerbated by developments in the Middle East, prompting a flight to the safe-haven USD. Notably, the Malaysian debt market witnessed significant RM1.0b net outflows on April 15. However, the ringgit managed to recover some losses and trade below the 4.790/USD level as authorities reiterated their readiness to deploy all available tools to support the local currency.

• The recent trilateral finance dialogue among the US, Japan, and South Korea hinted a possible coordinated large-scale Asian FX intervention. If realised, this move may help slow USD gains and reverse losses in risk-on FX. However, the continuous flow influx of money into the USD may only be reversed if US price data underperforms, prompting the Fed to consider rate cuts. Consequently, next week's US core PCE data will be closely monitored by the market. A weaker US GDP may also help to curb USD's gains. No surprises are anticipated from the upcoming PBoC and BoJ meetings next week. Domestically, stable growth prospects and authorities' continued support may help keep the ringgit stable.

Technical Analysis

• The USDMYR is expected to turn neutral-to-bearish next week, with the pair expected to trade near its 5-day EMA of 4.784.

• Technically, MYR could strengthen against the USD if risk sentiment improves, with immediate support at (S1) 4.781.

Source: Kenanga Research - 19 Apr 2024