Ringgit struggled to recoup its losses against the US Dollar last week, depreciating to as weak as 4.488 a whopping 67-month low, as the Dollar index (DXY) soared to above the 109 level and as the 10-year US Treasury yield spiked above 3.1%, which narrowed the Ringgit-US yield premium to below 90.0 basis points. However, despite a lack of catalysts and growing safe-haven flows, the ringgit managed to strengthen marginally against the greenback on a WoW basis, indicating that the demand for ringgit was stabilising.
The ringgit may struggle to retain its upward momentum against the USD as the DXY is expected to trade around the 108.5-109.5 level due to the Fed’s continued hawkishness at the Jackson Hole symposium. On top of that, EUR’s latest decline below parity against the USD, coupled with deteriorating China’s economic prospects may exert external pressure on the MYR. However, the ringgit may continue to benefit from the elevated commodity prices and positive MY-US government bond yield spread.
