The Malaysian ringgit is expected to remain pressured next week, with immediate resistance for the US dollar-to-ringgit paired at 4.272, according to Kenanga Investment Bank Berhad.
The ringgit initially strengthened to its highest level in over 39 months, reaching RM4.12 per US dollar on Monday, before sharply retreating to RM4.22 per dollar on Thursday.
With markets still pricing in two rate cuts this year, including at least one 50 bps cut, a potentially less dovish shift in the Fed’s outlook could further bolster the US dollar, barring major downside surprises in US data.
A pro-ringgit boost, in response to reports of a weaker-than-expected US Personal Consumption Expenditure (PCE) inflation and China’s stimulus measures last week, proved short-lived as the dollar rebounded.
The PCE index measures the cost of living for US households. It tracks the prices of a basket of goods and services, each with different weightings, to reflect how much a typical household spends every month.
This came after Fed Chair Jerome Powell pushed back against expectations of another 50 bps rate cut by year-end, further supported by an unexpected rise in August job openings.
Despite the slightly higher-than-expected US jobless claims on Thursday, the acceleration in the US service sector suggests the economy remains resilient.
The latest payroll data, to be released Friday evening, is expected to meet market consensus, while next week’s focus will turn to core inflation.
Also, the US dollar may also benefit from the risk-off sentiment linked to Middle East tensions as currency traders look for safe haven, a move that can push up demand for the dollar amid escalating violence in the region.
According to Kenanga Research, domestic factors may still offer some support to the ringgit, but stronger dollar could keep the ringgit pressured, likely trading between 4.23 and 4.25 in the near term.
