Ringgit likely to see cautious trading with upside bias next week

The ringgit is expected to trade in a cautious mode against the US dollar next week but with an upside bias as the local currency might attempt to move closer to the 4.25 psychological level, said an analyst.

FXTM market analyst Han Tan said the ringgit might rise if global risk sentiment was able to press on and overcome doubts over the pandemic’s impact on the global economy.

“However, should market participants decide to rein back their exposure to risk, Asian currencies could unwind some of their month-to-date gains and place the ringgit on a weaker path against the US dollar,” he told Bernama.

For the week ahead, he said Malaysia was set to report a fourth consecutive month of deflation, with June’s Consumer Price Index (CPI) forecast to come in at minus 1.8 per cent.

“This should help Malaysian bonds maintain attractive real yields and uphold foreign demand for onshore fixed-income securities while also supporting the ringgit,” he noted.

Tan said the guidance out of US-listed companies over the coming weeks was also set to continue influencing global market sentiment.

Throughout this week, the local currency was traded within a tight range against the greenback, staying mostly within the 4.26 – 4.27 level, he said.

The analyst said the ringgit was among the group of Asian currencies that ended the week little changed against the US dollar, as risk-appetite seized up.

“Investor sentiment has been left raw by a relatively choppy week in equity markets, as the US earnings season kicked off.

“The mixed signals out of major economies, such as the US and China, highlight the need for tempered optimism when considering the global economic recovery,” he added.

In terms of weekly performance, the ringgit ended Friday stronger against the greenback at 4.2630/2680 from 4.2650/2690 recorded seven days earlier.

Against other major currencies, the local currency was traded mixed.

The local currency increased against the British pound to 5.3467/3546 from 5.3773/3845 on the previous Friday and rose versus the Japanese yen to 3.9774/9836 from 3.9931/9979.

However, the ringgit slipped against the Singapore dollar to 3.0658/0698 from 3.0648/0684 and declined vis-a-vis the euro to 4.8649/8719 from 4.8152/8210 on previous Friday.

According to Tan, the ringgit’s performance against the euro and the British pound could see heightened volatility when trading resumes next week due to Brexit talks to be held in London on Monday as well as in reaction to this weekend’s talks surrounding the European Union’s proposed recovery fund.

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