KUALA LUMPUR, July 25 ― The ringgit is expected to stabilise and may trend higher next week, riding on the weaker US dollar amid rising tensions over the United States (US) and China dispute and ahead of the US Federal Open Market Committee (FOMC) meeting.
AxiCorp chief global market strategist Stephen Innes expects the US dollar to weaken next week as the US Federal Reserve would take a very dovish stance on its interest rate decision.
He said this would affect Asia foreign exchange (FX) risk in a positive way but not overly dramatically.
“I expect a test at 4.25 next week and the main driver will be the US dollar performance.
“The weaker greenback will be favourable for local markets as good things always happen for Asia markets as when the US dollar weakens, it attracts investment away from the US back into Asia,” he told Bernama.
The next FOMC meeting will be held on July 28 and 29.
The FOMC had on March 16 cut its benchmark interest rate to zero as the COVID-19 outbreak harmed communities and disrupted economic activity in many countries, including the US.
Innes, however, said due to the lingering effects of the US-China tensions, the local currency would move between 4.25 and 4.27 to the dollar.
On Friday-to-Friday basis, the ringgit ended slightly higher against the greenback at 4.2620/2660 from 4.2630/2680 recorded seven days earlier.
Against other major currencies, the local currency was traded mixed.
It fell against the Singapore dollar to 3.0764/0797 on Friday from 3.0658/0698 recorded on the previous Friday, and decreased versus the Japanese yen to 4.0068/0117 from 3.9774/9836.
The local currency depreciated against the British pound to 5.4268/4336 from 5.3467/3546 and weakened vis-a-vis the euro to 4.9426/9481 from 4.8649/8719 previously.
The ringgit was influenced largely by the greenback performance, COVID-19 cases in the US, oil prices movement, and the closure of China consulate in Houston, Texas.
On Thursday, Washington ordered China to close its consulate in Houston and a day later, Beijing retaliated by revoking the licence for the US consulate in Chengdu.
Meanwhile, on the local front, the Department of Statistics Malaysia on Wednesday announced that Malaysia's Consumer Price Index declined 1.9 per cent in June 2020 from a year earlier driven mainly by the transport component that slipped 14.3 per cent.
The decrease in the overall index was driven by the decline in transport (-14.3 per cent), housing, water, electricity, gas and other fuels (-2.6 per cent), clothing and footwear (-1.1 per cent), and furnishings, household equipment and routine household maintenance (-0.2 per cent), which contributed 45.7 per cent to overall weight. ― Bernama
