Ringgit Weekly Outlook - 16 June 2023

To remain bearish above the 4.60 threshold amid China’s weak economic sentiment

Even though the USD index (DXY) fell by 1.2% on a Thursday-toThursday basis, the ringgit still weakened against the greenback, mainly due to the depreciation of the yuan following the unexpected decision by the PBoC to reduce its key short-term policy rates by 10 bps. Additionally, the ringgit faced pressure from Malaysia's relatively subdued economic sentiment, which was influenced by China's economic downturn and uncertainty surrounding the direction of US monetary policy following the Fed's hawkish pause.

The ringgit may face continued pressure due to the anticipated further weakening of the yuan, as the PBoC is expected to lower its one-year loan prime rate by 10 bps next week to boost its sputtering economy. However, the ringgit's depreciation is expected to be limited around the 4.62 - 4.63 level, as the DXY is likely to hover near the 102.0 level amid lack of market conviction in the Fed's recent hawkish guidance (another 50 bps hike by end-2023). That being said, the market may continue to looks for signs of US disinflation and slowing economic activity before buying risk assets