Despite Bank Negara Malaysia’s surprise decision to pause its policy normalisation cycle, weaker-than-expected domestic trade data, and depreciation of the yuan, the ringgit extended its gains by more than 1.0% and traded close to its psychological level of 4.30, mainly due to the weakening of the USD index (DXY).
To note, DXY fell momentarily below the 112.0 level amid disappointing US retail sales and industrial production data.
The local note may trade under pressure during the holiday-shortened week and trade slightly weaker against the USD due
to the lack of pro-ringgit catalysts says Kenanga Research. Additionally, a further potential narrowing of MY-US yield premium as the market digests BNM’s surprise rate pause may induce capital outflow, weakening the ringgit. However, the ringgit’s depreciation may likely be capped by growing market expectations of a faster-than-expected Fed pivot, coupled with the ongoing risk-on sentiment
Looking into the week ahead, the USDMYR pair’s outlook is bullish, with the pair likely to trade near its 5-day EMA of 4.318 as the Relative Strenght Index points to an oversold position.
Technically, MYR is expected to shed some of its gains against the USD next week amid a potential capital outflow due to BNM’s rate pause decision. That being said, the pair may continue to face volatility and trade between 4.295- 4.333 added the analysts at Kenanga.
