THE ringgit is expected to trade in cautious mode with an upward bias against the US dollar next week, ahead of a US Federal Reserve decision on monetary policy.

Bank Muamalat Malaysia chief economist Mohd Afzanizam Abdul Rashid said the focus next week will be on a Dec 12-13 Fed meeting to decide interest rates.

“While most economists believe the Fed will stand pat on its rate decision, the highly anticipated dot plot figure will be closely scrutinised.

“The way we see it, the (Fed) meeting will be the key driver for bolstering the case for an interest rate cut in 2024 and by how much the Fed is willing to go to ease its monetary policy and by how low and how fast can it go.

“On that note, we believe the USD-MYR may test its immediate support level of RM4.6611 next week,” he told Bernama. 

SPI Asset Management managing partner Stephen Innes said ahead of the Fed decision next week, the ringgit market will likely trade more cautiously as traders will be curious about the number of rate cuts the Fed is pencilling in on the so-called “dot plot.”

“There is a bit of a risk around this event given the market is already pricing in 130 basis points of cuts.

“And if the Fed maintains only a 50 basis-point (cut) there could be too much cognitive dissonance and the market could turn risk-off and buy the US dollar,” he said. 

Kenanga Investment Bank Bhd said that “any dovish signal from the (Fed) meeting is expected to considerably bolster the ringgit.” 

Investors will also closely examine the US retail sales report for signs of waning consumer demand and China’s retail sales numbers to gauge the momentum of the country’s economic growth, it said.

“Domestically, improvements in industrial production and retail sales readings may further contribute to a ringgit appreciation,” it added.

The research house said trading between the dollar and ringgit is expected to hover around the range of 4.650-4.683 next week. However, a dovish Fed may drive the ringgit to trade below 4.600 to the greenback.

For the week just ended, the local note traded mostly lower following a weakening of the Chinese yuan after ratings agency Moody’s cut its outlook on China’s credit ratings to negative. 

On a Friday-to-Friday basis, the ringgit appreciated against the US dollar to 4.6625/6665 from 4.6710/6760 a week earlier. 

The local unit traded mostly higher against other major currencies. 

It strengthened against the euro to 5.0243/0286 from 5.0900/0954 a week ago and improved vis-a-vis the British pound to 5.8542/8593 from 5.9168/9231 at the previous Friday’s close. 

The local note dropped versus the Japanese yen to 3.2307/2337 from 3.1591/1627 a week earlier, but traded higher against its Asean peers. 

It rose against the Singapore dollar to 3.4818/4853 from 3.4973/5016 last week, was higher against the Indonesian rupiah at 300.4/300.8 from 301.5/302.1, strengthened against the Thai baht to 13.1933/2094 from 13.3301/3505, and increased versus the Philippine peso to 8.41/8.43 from 8.43/8.44 at the previous Friday’s close. – Bernama, December 9, 2023.