Ringgit to extend downward momentum

KUALA LUMPUR: The ringgit will likely extend its downward trend against the US dollar next week to between 3.96 and 4.00, mainly driven by external factors, said analysts.
OANDA Head of Trading in Asia-Pacific Stephen Innes said the ringgit was looking for a possible test of 4.00, subject to the significant US dollar momentum with external factors to drive momentum where the emerging market currencies, in general, continued to be under pressure.
"Meanwhile, oil prices look very heavy both from a fundamental and technical perspective, suggesting that we may be coming to an end in the bull market run.
"And this could weigh on the ringgit sentiment. The potential increase in OPEC (Organisation of the Petroleum Exporting Countries) output due to global concerns over Venezuela and Iran supplies could lead to a breakdown in OPEC/Non-OPEC compliance.
"While I don't believe it will, I need to guard against the possible outcome and reduce some long oil risk next week," he told Bernama.
Meanwhile, FXTM Global Head of Currency Strategy and Market Research Jameel Ahmad said the upcoming week would likely be a quieter one for the Malaysian economy as there would be very low volume of economic data scheduled from next week.
"I would personally keep a close eye on how investors would behave towards the US dollar as the ongoing resurgence in the greenback has pressured emerging market currencies over the past couple of weeks, while the cancelled US-North Korea Summit also has the potential to impact the local currency.
"If investor appetite towards risk reduces following this development, it could provide less buying demand for emerging market assets such as the ringgit," he told Bernama.
Jameel added that the US dollar-ringgit movement was largely dependent on how external factors impact investor sentiment towards emerging market currencies but the market could not necessarily rule out a future return for the ringgit to above 4.00-level against the greenback if investors were to adopt a risk-off stance.
"In the event that investor sentiment remains the same as it has done over the past week, the ringgit could also continue to trade in the same range as for the past week, as it is showing resilience towards defending itself around these levels," he added.
The ringgit was traded mixed throughout the week in the aftermath of the 14th general election and in line with the oil market movement, as well as concern over the possible US interest rate hike with the release of US Federal Reserve minutes this week.
On a Friday-to-Friday basis, the local note fell against the greenback to 3.9790/9830 from 3.9700/9740.
It declined against the Singapore dollar to 2.9721/9753 from 2.9523/9557 and depreciated against the yen to 3.6348/6391 versus 3.5769/5815.
However, the local note strengthened vis-a-vis the British pound to 5.3128/3197 from 5.3516/3577, and increased against the euro to 4.6606/6665 from 4.6751/6806 previously. — Bernama