Ringgit set to confirm its gains against US dollar

PETALING JAYA: For the week ahead, the ringgit is expected to cross below its 200-day counterpart, affirming its gains against the greenback while potentially paving the way for the ringgit to strengthen further.

In a note by FXTM, market analyst Han Tan said the currency pair’s 50-day moving average (MA) is expected to guide it downwards, potentially towards 4.108, although a breach of the 50-MA could call upon the 4.1777 line as a resistance level, having already proved its worth in September.

“Moving forward, the spectre of domestic political uncertainty may weigh on the ringgit’s performance over the near-term. However, such pressures should prove transitory once there is more certainty surrounding Malaysia’s policy outlook.”

Tan said the US political volatility surrounding the next round of fiscal stimulus is expected to be the primary driver of global risk sentiment at present, as shifting market expectations surrounding the next stimulus package could likely move broad asset classes, including global equities and the dollar/Asia complex.

On the local front, Tan said, Malaysia’s August industrial production data is expected to register a 0.2% year-on-year increase. However, a better-than-expected reading could buffer support for the ringgit, even as the currency remains primarily influenced by extraneous factors.

‘The dollar/ringgit put in a stable performance last week, sticking to a tight range within the 4.145-4.165 lines. The Chinese yuan’s strong performance after returning from a week-long holiday encouraged regional currencies to explore more of their upside against the US dollar, with the Singapore dollar, Thai baht, and the ringgit having positive correlations with the yuan.

“The undeterred expectations for an agreement over the next US fiscal stimulus package also ensured that the greenback stuck to its weakening bias, while alleviating the pressures on Asian currencies,” Tan said.