Ringgit expected to trade in tight range of 4.20-4.22 against US dollar next week

Ringgit expected to trade in tight range of 4.20-4.22 against US dollar next week
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KUALA LUMPUR (July 24): The ringgit is expected to trade in a tight range of between 4.20 and 4.22 next week, weighed by the continuous rising of Covid-19 cases in the country and cautious sentiment ahead of the US Federal Reserve (Fed) policy meeting.

Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the market’s major focus next week would be the Fed’s two-day policy meeting that is scheduled to wrap up on Thursday.

“The last meeting was on June 16, where US Fed officials cited that Covid-19 will be a drag on the economy and since then, cases have been rising due to the Delta variant. 

“Notwithstanding this, the market is still expecting the meeting to produce some advancement in the discussions for a tapering of stimulus,” he told Bernama.

He said the US also had an earlier strong vaccination drive, which could perhaps prevent a wider spread of the Delta variant.

“If this were to be the case, we expect the dollar index to rise and subsequently lead to depreciation of the ringgit,” he added.

Malaysia recorded the highest number of daily Covid-19 cases yesterday after the Ministry of Health (MoH) reported 15,573 new cases, bringing the cumulative total to 980,491 cases.

The previous highest number of daily new cases recorded was 13,215 on July 15, 2021.

Meanwhile, the Department of Statistics Malaysia (DOSM) yesterday announced that Malaysia’s Consumer Price Index (CPI) rose by 3.4% year-on-year (y-o-y) to 123.2 in June 2021 versus 119.1 in the same month last year.

“As the CPI for June increased by 3.4%, slower than the 4.4% rise in May, weaker inflation growth means that the economy is not expanding, therefore [it] will take a longer time to recover,” Adam said.

He added that Malaysia’s export data for June 2021, to be released next Wednesday, is expected to record a double-digit y-o-y growth, albeit at a slower pace amid dissipating low-base effects.

On a weekly basis, the ringgit weakened versus the US dollar to 4.2255/2275 from 4.2040/2070 a week ago.

The local unit was lower against other major currencies except the British pound where it appreciated to 5.8054/8082 from 5.8129/8170 in the preceding week.

It depreciated against the Singapore dollar to 3.1070/1089 from 3.1053/1078 a week earlier, weakened against the euro to 4.9726/9749 from 4.9687/9723 and slipped vis-a-vis the Japanese yen to 3.8254/8275 from 3.8180/8207.