Ringgit Weekly Outlook - 30 June 2023

Weakening bias to hold on expectations of a hawkish Fed, but technical correction likely

The ringgit continued to weaken near the 4.68 level against the greenback, as the USD index (DXY) has once again ascended above the 103.0 level. This rise was driven by solid US macroeconomic data and a hawkish stance from the Fed. Adding to the pressure was the further weakening of the yuan, which surpassed the 7.20/USD threshold due to the lack of intervention by the People's Bank of China and China's weak factory activity.

MYR is expected to further depreciate against the USD to near the 4.69 area as investors may still maintain a long USD position in anticipation of tonight's release of the US core PCE data (Consensus: 0.3% MoM; Apr: 0.4% MoM). Any upside surprise to the inflation data may help the DXY to remain bid near the 104.0 level, weakening the ringgit. For next week, key highlights include the release of the US FOMC minutes, US job reports, China's manufacturing readings and BNM's interest rate decision. A weaker US labour market and signs of China's economic activity recovery are expected to help the ringgit to recover some of its losses.