Ringgit May Edge Closer To RM4.60: Kenanga

The local currency notched a third straight week of losses and closed the holiday-shortened week at its weakest level against the USD since January 1998. This was attributable to a higher 10-year US Treasury yield and USD index amid hawkish Fed bets after the release of higher-than-expected US CPI data (8.3% YoY; consensus: 8.1%).

The ringgit was dragged down by the offshore yuan’s depreciation past the 7.00 per USD psychological threshold due to persistent capital outflows.

There is a possibility for the currency to trade around 4.52-4.55 against the safe haven USD amid growing risk-off sentiment on expectations that the Fed may continue to jack up the rate by another 75 basis points (bps). On the flip side, the continuation of the rate hiking cycle by other major central banks, coupled with strong domestic trade figures should limit the ringgit’s further losses.

However, Kenanga notes if the Fed hike by an unprecedented 100 bps, the USDMYR pair may move closer to the 4.60 level.

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