Kuala lumpur: The ringgit is expected to trade between 4.25 and 4.26 against the US dollar next week, as recent weaker-than-expected United States Nonfarm Payrolls (NFP) data for July may lead the US Federal Reserve to consider an interest rate cut at its September meeting.
According to BERNAMA News Agency, the NFP data for July showed a significant shortfall, with just 73,000 jobs added, well below the consensus estimate of 106,000. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that this data could boost sentiment for the ringgit due to increased expectations of a possible rate reduction by the Fed.
He highlighted that the NFP figures for May and June were also revised sharply lower, reinforcing the likelihood of a rate cut. Dr Mohd Afzanizam pointed out that this aligns with the views of two dissenters in the last Federal Open Market Committee meeting who favored a quarter-point reduction.
He further mentioned that the outlook for the Fed Fund Rate was a key consideration for traders, with the Fed appearing indecisive on further monetary policy accommodation during the recent meeting. Additionally, Dr Mohd Afzanizam mentioned the US government's decision to reduce a reciprocal tariff on Malaysia from 25 percent to 19 percent, suggesting this could mitigate some impacts.
He expressed optimism that this tariff adjustment is a positive move and might open up opportunities for further negotiations, potentially benefiting the ringgit over the medium term. Moreover, he believes that the recently announced 13th Malaysia Plan will play a supportive role for the ringgit in the medium to long term.
The 13th Malaysia Plan, presented by Prime Minister Datuk Seri Anwar Ibrahim, includes an increase in development expenditure to RM430 billion, which is anticipated to bolster domestic demand and investment activities, supporting Malaysia's GDP growth.
On a weekly basis, the ringgit closed lower against the greenback, ending at 4.2750/2815 compared to 4.2195/2245 previously. However, it showed strength against a basket of major currencies, appreciating against the Japanese yen, euro, and British pound. The ringgit also trended higher against several ASEAN currencies, except for the Indonesian rupiah, where it saw a slight decline.