KUALA LUMPUR, Feb 8 — The ringgit will likely extend its downward trend against the US dollar next week, amid bullish greenback outlook and uncertainties surrounding the impact of the 2019 coronavirus outbreak, said analysts.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said risk aversion trade was expected to remain prevalent in the near term, leading to higher demand for the safe-haven currencies.
The financial markets are still fixated with the coronavirus outbreak with the number of casualties continuing to rise, he said.
The market is waiting for the release of fourth-quarter 2019 Gross Domestic Product to be released next week as the key driver for market direction and to gauge the latest assessment by Bank Negara Malaysia (BNM) on the coronavirus outbreak’s impact on the Malaysian economy, he said.
“BNM would want to indicate that they have the policy flexibility and stand ready to act if the situation warrants further monetary easing.
“Hence, we are not ruling out the possibility of additional Overnight Policy Rate cut on the horizon. As such, the ringgit could be hovering around the immediate resistance level of RM4.1406 against the US dollar,” he told Bernama.
For the week just ended, the ringgit ended lower against the US dollar at 4.1360/1400 compared with last Friday’s 4.0960/1000.
Hong Leong Bank Bhd said in a note that the ringgit was among the top Asian losers last week, right behind the Singapore dollar, on the back of stronger US dollar that was boosted by upbeat data and lingering coronavirus concerns.
The dollar headed stronger during the week, helped by rising confidence in the US economy with US dollar index (DXY) touching a high of 98.572 from a low of 97.35 at the start of the month.
“President Donald Trump’s acquittal in his impeachment trial helped to reduce some near-term policy uncertainty while China’s announcement of some cuts on tariffs on US goods, as part of US-China phase one trade deal, also helped to support the greenback,” it said.
The bank said the US dollar outlook remained bullish, with DXY 99.00 in sight, particularly if risk aversion continues next week as there is still further room for the currency to strengthen given the lack of positive virus-related headlines.
“We expect the pair to trade within 4.14 to 4.15 next week should it breached the 4.1400 big figure resistance,” it added.
On a Friday to Friday basis, the local currency was traded mixed against a basket of currencies.
It was higher against the Singapore dollar at 2.9730/9769 from 2.9988/3.0032 last Friday and increased against the British pound to 5.3466/3534 from 5.3723/3792.
The local currency slipped against the euro to 4.5306/5354 compared with 4.5167/5227 and depreciated vis-a-vis the Japanese yen to 3.7672/7712 from 3.7581/7628 previously. — Bernama
