Ringgit To Find Support From Stable Domestic Economy And Softer USD
The catalyst for the ringgit's rally was Friday's soft payrolls data, which drove the DXY Dollar Index below the 99.0 mark. This prompted markets to re-evaluate the US Federal Reserve's trajectory, with traders now pricing in expectations for three 25 basis point rate cuts this year.
Adding to the pressure on the greenback was a series of political and economic headlines. President Trump's reported firing of the Bureau of Labor Statistics (BLS) chief, the resignation of Federal Reserve Governor Kugler, and an ongoing tariff dispute between the US and India injected a fresh 'risk premium' into US assets. Furthermore, optimism surrounding a potential Ukraine-Russia truce and dovish comments from Fed officials hinting at weakening labor conditions further weighed on the USD.
Market attention is now turning to upcoming US inflation figures. Persistent price pressures could delay the Fed's expected rate cuts. Consensus forecasts predict that core Consumer Price Index (CPI) will rise by 0.3% month-on-month (from 0.2%), while the Producer Price Index (PPI) is expected to increase by 0.2% (from 0.0%). If inflation proves to be hotter than expected, investors may be forced to once again reassess the Fed's policy path.
In addition to economic data, traders will continue to monitor Fedspeak and new tariff announcements for clues on future market direction. President Trump's proposed tariffs on semiconductors and pharmaceuticals are likely to continue to dampen sentiment in riskier assets, while pressure on BRICS nations and signs of strain in the US-China trade détente add to the uncertainty.
Despite the external uncertainties, Kenanga Research expects the ringgit to find support from domestic economic stability and the softer US dollar, likely holding near its current levels. Technically, the USD/MYR pair is hovering near its 5-day Exponential Moving Average (EMA) at 4.23. The immediate support level is at 4.23 (S1), with resistance at 4.24 (R1).
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