KUALA LUMPUR, Aug 29 ― The ringgit will likely trade higher against the US dollar next week on stronger demand for the local note after US Federal Reserve chairman Jerome Powell unveiled a new approach to setting US monetary policy.
OANDA Asia-Pacific senior market analyst Jeffrey Halley said the two key takeaways from Powell’s address is that the Fed would allow inflation to overshoot its two per cent target to get an “averaging” effect, while secondly, rates are going to be lower for longer and longer.
Following the speech, the US yield curve steepened with 30-year rates rising more than the two-year short-end, lifting the US dollar with it.
Nevertheless, the increase in US yields was snuffed out as soon as it began, crushing the possibility of a US dollar bullish correction.
On a Friday-to-Friday basis, the ringgit was broadly higher against the US dollar at 4.1630/1680 from 4.1780/1800 in the previous week.
Meanwhile, Bank Negara Malaysia (BNM) announced yesterday that Malaysia’s international reserves remained usable as at end-July 2020, with official reserve assets at US$104.21 billion (RM434.4 billion), in accordance with the International Monetary Fund’s Special Data Dissemination Standard (IMF SDDS) format, which is higher compared with US$103.4 billion as at June 30.
Another major piece of news during the week was Japanese Prime Minister Shinzo Abe’s plans to resign, which saw the yen bounce off a two-week low against the US dollar on Friday.
The ringgit, however, traded higher against the yen at 3.9393/9444 compared with 3.9561/9583 recorded last week.
Commenting on this development and its possible effect on regional currencies, Halley said: “The issue is entirely localised to Japan, economic policy will not markedly change. Its effects will be minimal to zero on other Asian currencies.”
The ringgit fell against the Singapore dollar to 3.0581/0629 from 3.0528/0553 last Friday, depreciated against the British pound to 5.5251/5322 from 5.5012/5046, and declined against the euro to 4.9486/9562 from 4.9355/9383 previously. ― Bernama
