After trading above the 4.70 psychological threshold for 18 consecutive trading days, the ringgit strengthened by almost
1.0% against the USD, partly due to tightening domestic labour market conditions and sharp appreciation of the yuan. The local note may extend its gains today due to potential double-digit growth in Malaysia’s 3Q22 GDP reading and further weakening of the USD index (DXY) amid cooler-than-expected US core inflation reading (Oct: 0.3% MoM; Sep: 0.6%; consensus: 0.5%).
Despite a sharp correction in the DXY due to rising market expectations of a more dovish Fed, the ringgit may continue to
rollercoaster between gains and losses and trade around the 4.64 – 4.72 zone amid heightened political risk ahead of the general election. The local note may also be influenced by the direction of the volatile yuan due to the uncertainty over China’s zero-COVID19 policy and the movement of the EUR, which hinges on the European Central Bank’s stance on its monetary policy.
Kenanga notes the USDMYR pair’s outlook is bullish in the week ahead, with the pair expected to trade close to its 5-day of 4.709 as the pair’s RSI is near its oversold position. .
