KUALA LUMPUR, Sept 14 — The improved global sentiment following easing US-China trade tensions is expected to continue driving the ringgit upward next week, moving between 4.15 and 4.1750 against the US dollar.
Axi Trader Asia-Pacific market strategist Stephen Innes said the global foreign exchange (forex) markets would pay attention to trade war news flow, which had been a significant driver of regional sentiment.
“I’m a bit optimistic as I think both Washington and Beijing want to take the first mini step to settling the trade war spat, which will be China buying more US agricultural products in exchange for a deferral of December tariffs,” he told Bernama.
US President Donald Trump on Sept 12 announced the increased tariffs on China, scheduled to go into effect on Oct 1, would be delayed by two weeks.
Innes said the ringgit could appreciate further if the Chinese yuan moved below 7.00 to the US dollar and there was positive development on the FTSE Russell’s World Government Bond Index (WGBI) watch list announcement.
“The biggest local overhang is if FTSE Russell will drop Malaysia from the WGBI. However, I do not think (such exclusion will happen, especially) after the liberalisation steps Bank Negara Malaysia made in the foreign exchange administration policy,” he explained.
Commenting on the European Central Bank’s (ECB) stimulus package and key rate cut decisions, Innes said this could help push the ringgit higher given the possibility of the euro weakening against the US dollar over the near term, as the ECB would likely pause on further stimulus, whereas the US Federal Reserve (Fed) could give the nod to more rate cuts.
He said markets were pricing in a 25-basis point rate cut which could hurt US dollar sentiment.
“Currency markets will now turn focus to the Fed’s rate decision (next week), which should provide a good indication for US dollar’s next direction.
“As usual, the forex markets will focus on the US as forward guidance. The lower the US interest rates, the better for the ringgit,” he said.
For the week just ended, the local note extended its strong performance against the US dollar amid fragile greenback sentiment.
The ringgit ended the week higher at 4.1630/1660 against the greenback from 4.1780/1830 on the previous Friday.
The local currency traded mostly lower against most other major currencies, except the yen.
The ringgit fell against the Singapore dollar to 3.0318/0345 from 3.0221/0261, weakened versus the British pound to 5.1829/1883 from 5.1385/1463, and decreased against the euro to 4.6205/6255 from 4.6079/6147 previously.
However, the ringgit rose vis-a-vis the Japanese yen to 3.8550/8581 from 3.9050/9101.
The market will be closed on Monday in conjunction with Malaysia Day and resume operations on Tuesday. — Bernama