Ringgit Weekly Outlook - 17 November 2023

To gain momentum amid improving risk sentiment, pending a dovish shift in FOMC minutes

Despite the sharp decline in the USD index towards the 104.0 level following the release of softer-than-expected US inflation readings, the ringgit only experienced a modest appreciation of 0.11% on a week-on-week basis on 17 Nov against the greenback. The dovish repricing of future Fed rates, with the first anticipated cut likely in May 2024, has not contributed substantially to the strengthening of the local note below the 4.60/USD threshold. The market is waiting for stronger evidence of a weakening US economy before considering an increase in exposure to high-risk assets.

The improvement in risk environment, stemming from a reduction in US-China tensions and the avoidance of a US government shutdown may help to bolster the ringgit to trade below the 4.65/USD next week. However, the disconnect in US macro data, as seen with stronger-than-expected retail sales but a weaker-thanexpected labour market, is expected to persist, preventing the establishment of a sustained USD bearish trend. Next week, market attention will shift to the FOMC minutes, with a keen focus on any dovish signals. If such signals emerge, it could have a positive impact on the ringgit. Domestically, if the 3Q23 GDP reading today surpasses expectations, it could bolster the local note.