Ringgit Weekly Outlook - 6 October 2023

Shifting to a mixed bias due to US economic uncertainty and Malaysia’s budget 2024

The ringgit depreciated to its weakest level in 11 months as the USD index (DXY) soared to as high as 107.0 (Oct 3) due to an improvement in the US ISM manufacturing PMI and a hawkish Fed speech. The DXY was further bolstered by the better-than-expected US JOLTS job openings figure. The widening of the negative 10year MY-US government bond yield differential has also pressured the ringgit to trade above the 4.70/USD level. Nevertheless, the ringgit managed to pared some of its losses following news of US private payrolls recording its slowest growth since Jan 2021

While the ringgit is expected to trade in the range of 4.71 to 4.73 next week, driven by robust demand for the safe-haven USD amid the recalibration of the Fed's monetary policy cycle, the direction of the currency will primarily be influenced by the US nonfarm payrolls and inflation data. If these readings turn out to be lower than consensus, it could trigger another adjustment in the Fed's cycle, potentially leading to more rate cuts expectations next year and resulting in a USD sell-off, which would benefit the ringgit. Additionally, the local note may find support from the expected progrowth federal budget for 2024 to be unveiled on Oct 13.