Despite the absence of macro catalyst, the ringgit outperformed its ASEAN-5 peers against the USD on a Thursday-to-Thursday basis.
Kenanga Research’s Economic Viewpoint today cited that this could be partly due to the country’s strong fundamentals and government’s persistent push towards fiscal consolidation. Most emerging currencies gained against the USD due to increasing fragility in the US housing market and the expectation of a Fed pivot.
However, profit taking activities and better U.S. GDP reading (3Q23: 5.2% QoQ; Preliminary: 4.9%) have limited the MYR’s gains.
The combination of cooling inflation and labour market pressures in the US, as evidenced by a softer US PCE price index and higher US jobless claims, is seen to strengthen the Fed’s dovish narrative, benefiting risk assets.
Today, the market may shift its attention to the fireside chat at Spelman College—the last instance we will hear from the Fed before the FOMC blackout period.
Any hint from Fed’s Powell that the current rate is sufficient and the battle against inflation is concluded may significantly weaken the USD. Key US jobs data next week will be eagerly awaited, and further signs of ebbing labour market momentum may convince the hawks that the US economy is finally slowing, potentially fuelling an early rate-cut rally, Kenanga added.
Technical Analysis
The USDMYR outlook remains neutral, with the pair likely to hover near 5-day EMA of 4.667 as its RSI sits in the middle of the range.
Technically, should there be any risk-on buying interest, the ringgit is expected to extend its gains and trade around the (S2) 4.639 – (S1) 4.655 level.
Conversely, a breach above the (R1) 4.683 level is needed to confirm MYR’s weakening bias.
