When it comes to the exchange rate movement, the view is that the recent relative weakening in the Ringgit vis-à-vis the US dollar should be seen in the context of the broad dollar strength, rather than a move pertaining to the Ringgit. Against a basket of currencies, the Ringgit has recently rebounded and is trading at levels near its peak strength since September 2020. On a 6-month horizon, the MYR outperformed the INR, THB, PHP, TWD, KRW and JPY, but underperformed the CNY, IDR and SGD.
USD/MYR is biased to the upside near-term on broad dollar strength as global recession worries grow, while BNM is likely lagging the Fed in hiking rates in the relative magnitude of the move. Next resistance for USD/MYR is not far away at the recent high of 4.4255, while support sits at 4.4000. Further out, when the most aggressive Fed rate hikes are out of the way, and with the potential for Malaysia’s current surplus to widen back (when imports bills and repatriation of income normalise), there is room for USD/MYR to fall towards 4.3800 by year-end.
BY SELENA LING, CHIEF ECONOMIST, OCBC BANK
