The ringgit is expected to maintain a range-bound trend against the US dollar in the near term, with Kenanga Research seeing scope for modest appreciation as geopolitical risks ease and domestic economic data remain supportive.
The local currency traded broadly flat at around RM4.09 to the US dollar this week, despite a sharp decline in global oil prices as optimism over a potential agreement involving the Strait of Hormuz improved risk sentiment.
Brent crude averaged around US$81 a barrel during the week, down from above US$90 last Friday.
However, the softer oil prices did not translate into significant gains for the ringgit, with Kenanga noting that expectations surrounding US Federal Reserve policy have increasingly become the key driver of the US dollar’s direction.
The market is currently pricing in a potential Fed rate hike in September, although Kenanga disagrees with this view and maintains its base case for an extended pause in US monetary policy.
“This suggests US rate expectations, not energy prices, are now driving USD direction,” the research house said.
Investor caution ahead of the US non-farm payrolls report also kept the US dollar-ringgit pair range-bound
Kenanga said the immediate focus would be on the US payrolls report, with consensus expectations for around 80,000 new jobs.
However, softer ADP employment and ISM services data point to downside risks to the payrolls outcome, potentially challenging expectations of a September Fed rate hike.
Attention will subsequently turn to US consumer price index data next week.
Kenanga expects only modest monthly gains in US inflation, which it believes would reinforce its view that the Fed will remain on an extended pause rather than resume tightening monetary policy.
For Malaysia, upcoming economic indicators including industrial production, labour market data, retail sales and final second-quarter 2026 gross domestic product figures could provide additional support for the ringgit if they exceed expectations.
Kenanga’s baseline scenario assumes negotiations surrounding the Strait of Hormuz continue to contain geopolitical risks without causing significant disruptions to global energy supplies.
Against this backdrop, softer US labour market conditions and modest inflation would support the research house’s expectation of an extended Fed pause.
This view contrasts with current market pricing for a September rate hike and represents the key factor underpinning Kenanga’s positive bias towards the ringgit.
“Supportive domestic data may encourage selective capital inflows as external risks gradually ease,” it said.
Kenanga expects the US dollar-ringgit exchange rate to trade within the RM4.07 to RM4.10 range, with risks skewed towards modest ringgit strength.
From a technical perspective, the currency pair remains range-bound while the ringgit continues to hold above its five-day exponential moving average, suggesting near-term momentum remains relatively stable.
