KUALA LUMPUR, Nov 2 ― The ringgit is likely to trade on a cautious note against the US dollar next week ahead of Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) meeting on Tuesday next week, its last meeting for this year.
Maybank Research in its note yesterday said it expected BNM to keep the overnight policy rate (OPR) on hold at 3.0 per cent.
This was in view of the sanguine official growth and inflation forecasts, growth-supportive Budget 2020, easing in financial conditions and the de-escalation of the US-China trade war, it said.
FXTM market analyst Han Tan concurred with Maybank Research on the OPR forecast. He said: “Although the US Federal Reserve (Fed) had signalled an apparent pause in interest rate cuts for the time being, global central banks may have to roll out more stimulus measures should the economic headwinds persist in 2020.”
He added the market, however, was forecasting that the US Federal Open Market Committee (FOMC) might have to resume its policy easing in March 2020, which may create for a soft US dollar environment in the interim.
Last Thursday, the Fed reduced interest rates by 25 basis points for the third time this year and signalled a pause in further cuts unless the economic outlook changes materially. The reduction was in line with market expectations.
"On the domestic calendar, Malaysia’s September external trade figures will be set against the theme of global trade tensions, as investors await the signing of the US-China ‘phase one’ trade deal.
“After August’s surprise contraction, Malaysia’s exports are expected to return to growth in September," Tan told Bernama.
AxiCorp Asia Pacific market strategist Stephen Innes said the ringgit was likely to trade within 4.15 to 4.18 level against the greenback next week mainly due to the expectations on BNM's decision to hold interest rates.
The ringgit was traded higher throughout the week just-ended amid persistent weakness of the greenback.
Meanwhile, US-based critical information, analytics and solutions provider IHS Markit Ltd on Friday reported that the underlying trend within Malaysia's manufacturing sector gained traction at the start of the fourth quarter, with the headline index picking up to a six-month high.
Its headline Purchasing Managers’ Index, a composite single-figure indicator of manufacturing performance, increased to 49.3 in October from 47.9 in September, its highest level for six months and reviving to sit broadly in line with a historical average.
The ringgit ended the week sharply higher against the greenback at 4.1640/1670 against the previous week's 4.1845/1875.
The local currency was traded mixed against a basket of other major currencies on Friday.
On a Friday-to-Friday basis, it rose against the Singapore dollar to 3.0649/0683 from 3.0692/0725 but declined to 3.8538/8569 vis-a-vis the yen from 3.8506/8548 last week.
The ringgit appreciated versus the euro to 4.6420/6470 from 4.6502/6552 but eased against the pound to 5.3915/3963 against 5.3716/3768 previously. ― Bernama
