The ringgit strengthened marginally against the US dollar, supported by growing expectations of a more dovish Federal Reserve outlook following weaker-than-expected US labour market data, according to Kenanga Investment Bank Research.
The ringgit firmed to RM4.087 against the US dollar, from RM4.091 last Friday, after weak US payroll figures prompted markets to reassess the Federal Reserve’s interest rate trajectory.
Kenanga said the ringgit briefly strengthened to around RM4.086/USD following the release of US payroll data showing a decline of 23,000 jobs, compared with market expectations of an increase of about 80,000 jobs.
The sharp downward revisions to previous payroll figures further reinforced expectations that the US labour market is losing momentum, triggering a dovish repricing of Fed policy expectations.
However, the ringgit’s gains were subsequently pared as US inflation data came in broadly in line with expectations and hawkish comments from Federal Reserve official Beth Hammack tempered expectations for an imminent shift in monetary policy.
Kenanga said the latest developments support its view that weakening US labour market and inflation momentum should eventually encourage the Fed to maintain an extended pause in interest rate adjustments.
Nevertheless, persistent hawkish communication from Fed officials is expected to keep US dollar positioning defensive and limit the ringgit’s near-term upside.
Markets will turn to upcoming US retail sales and consumer sentiment data for further indications of the strength of the US economy.
Kenanga said the release of the Federal Open Market Committee (FOMC) minutes next week will also be closely watched for clues on policymakers’ views ahead of the Jackson Hole economic symposium and the Fed’s September policy meeting.
Domestically, the final reading of Malaysia’s second-quarter 2026 gross domestic product (GDP) will be a key focus, with Kenanga expecting growth of 5.9%, slightly above the consensus forecast of 5.8%.
Trade data will also provide further indications of the strength of Malaysia’s external sector.
Meanwhile, geopolitical developments remain a potential source of volatility. Kenanga cautioned that stalled US-Iran ceasefire talks could threaten oil supplies and trigger renewed risk-off sentiment across financial markets.
Under its baseline scenario, Kenanga expects softer momentum in the US labour market to persist while inflation remains contained and geopolitical risks stay manageable.
Such an environment could encourage investors to maintain carry positions and gradually reduce their exposure to the US dollar as expectations for Fed policy adjust.
The research house noted that market pricing for a December Fed rate hike remains divergent from its own expectations, leaving room for further downside in the US dollar.
Kenanga expects USD/MYR to trade within the RM4.08 to RM4.10 range, with risks skewed towards modest ringgit appreciation.
From a technical perspective, the USD/MYR pair remains neutral-to-bearish, with the seven-day Relative Strength Index (RSI-7) at 40 indicating fading momentum.
The pair is also trading below its five-day exponential moving average (EMA-5) of 4.09, further supporting Kenanga’s view of a modestly stronger ringgit bias in the near term.
