Kuala lumpur: The ringgit is anticipated to trade between 4.13 and 4.16 against the US dollar next week, showing a slight upward bias after experiencing fluctuations this week as market participants adjusted their expectations regarding a potential US interest rate cut at the forthcoming December meeting.
According to BERNAMA News Agency, the local currency experienced a decline on Monday, Tuesday, and Thursday, but managed to rise on Wednesday and concluded the week on a stronger note despite the release of a US non-farm payrolls report for September that exceeded market forecasts. The report indicated that 119,000 jobs were created during the month, surpassing expectations.
Dr. Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd, explained that the ongoing 41-day US government shutdown since October 1 has influenced the visibility of economic data. He noted that the markets currently seem convinced that there will be no rate cuts, as reflected by the interest rate futures contracts.
Kenanga Investment Bank Bhd, on the other hand, expects a technical correction, with the ringgit likely consolidating around RM4.15 against the US dollar next week, as the Federal Reserve remains cautious in the lead-up to the December meeting. In a note released on Friday, the bank highlighted that the ringgit had eased from 4.13 to 4.15 against the US dollar earlier in the week, briefly touching 4.16 on Tuesday after market sentiment shifted away from expecting a dovish Fed in light of the US reopening.
The bank further reported that expectations for a December rate cut have decreased to below 50 percent due to revived safe-haven demand for the US dollar amid risk-off sentiment. Hawkish minutes from the Federal Reserve and the US Bureau of Labour Statistics' delay in payroll revision announcements have reinforced this perspective.
Kenanga Investment Bank pointed out that despite the US non-farm payroll gains surpassing expectations, the unemployment rate had also edged higher. The bank now assesses less than a 40 percent likelihood of a rate cut in December, even if forthcoming data such as jobless claims, the ADP report, retail sales, and the Producer Price Index show signs of weakening.
The bank's medium-term outlook remains unchanged, predicting three additional rate cuts by the Federal Reserve over the next year. It anticipates that the US economic weakness will become more evident by mid-December with the release of new labor market data. For Malaysia, factors such as steady foreign inflows into local bonds, continued repatriation of export earnings, and a stable macroeconomic backdrop are expected to keep the ringgit relatively firm through the year-end.
On a weekly basis, the ringgit weakened against the US dollar, closing at 4.1460/1495 compared to 4.1290/1345 the previous week. It traded higher against a basket of major currencies, gaining against the British pound, euro, and yen, but largely trended lower against its ASEAN peers, with mixed performances against the Singapore dollar, Indonesian rupiah, Philippine peso, and Thai baht.