Ringgit downtrend expected to continue next week

The ringgit traded mixed against a basket of major currencies. — Reuters pic
The ringgit traded mixed against a basket of major currencies. — Reuters pic

KUALA LUMPUR, May 19 — The ringgit is expected to remain on a downtrend against the US dollar next week at between the 3.96-3.99 levels and on further demand for the greenback, said a dealer.

Oanda Head of Trading in Asia-Pacific, Stephen Innes said factors that would drive the greenback include the higher US Treasury yield and a faster-than-expected increase in the US interest rates due to strong economic data. 

"The US dollar will continue to stay firm against all Asian currencies, partly because, investors too are cautious about the on-going trade negotiations between the US and China," Innes told Bernama. 

On the local front, he said sentiment would also weigh on discussions around the removal of the Goods and Services Tax (GST) and how credit rating agencies view the matter, despite the improvement in oil prices. 

During the week, the benchmark Brent crude topped US$80 per barrel for the first time since November 2014, as the market grew concerned over US President Donald Trump administration's effort at sanctioning Iran's crude oil exports.

Meanwhile, FXTM's Global Head of Currency Strategy & Market Research, Jameel Ahmad said following further investor appetite for the US dollar in the coming weeks, the ringgit may breach the 4.0 level.  

"But, it must be pointed out that weakness in the ringgit is not due to a change in Malaysia's economic outlook. 

“Investors are also monitoring other data announcements in the country next week, including the latest inflation data due for release on May 23

"The expectation is that the inflation rate will be around 1.3 per cent.But, there is a risk of inflation edging higher over the upcoming months, following the weakness in the ringgit and emerging markets since April, as a result of a transformation of investor sentiment towards the US dollar," he added. 

The ringgit traded mixed against a basket of major currencies.

On a Friday-to-Tuesday basis, the local note fell against the greenback to 3.9700/9740 from 3.9480/9530,

It declined against the Singapore dollar to 2.9523/9557 from 2.9498/9540, but increased against the yen to 3.5769/5815 from 3.6250/6299.

 The local note depreciated vis-a-vis the British pound to 5.3516/3577 from 5.3353/3437, but strengthened against the euro to 4.6751/6806 compared with 4.6898/6962 last Tuesday.

The market was closed last Wednesday for the 14th General Election, as well as on Thursday and Friday, to observe special public holidays in conjunction with the Pakatan Harapan coalition’s victory. — Bernama