KUALA LUMPUR, Oct 31 — Bank Negara Malaysia’s (BNM) policy rate decision on November 3 and Budget 2021 tabling on November 6 are set to be catalysts for the ringgit against the US dollar and other major currencies next week.
The Overnight Policy Rate (OPR) is currently at 1.75 per cent after the central bank slashed the key interest rate by a cumulative 100 basis points (bps) during its Monetary Policy Committee meetings this year.
FTXM market analyst Han Tan said additionally, the domestic political uncertainties also added another layer of risk which could affect the local currency’s performance.
However, he noted that the US dollar/ringgit movement would still primarily be driven by external factors.
“For the week ahead, an increase in risk aversion could see the US dollar/ringgit testing the 4.1707 resistance level, with stronger resistance set around the 4.20 psychological level.
“However, a steep decline in the US dollar could bring the 4.14 level back into focus for the currency pair, while a path towards the 4.10 psychological level cannot be ruled out if the greenback capitulates on the back of a decisive Joe Biden win or some surprisingly dovish US Federal Reserve commentary,” he said.
The 2020 United States (US) presidential election is scheduled for November 3. It will be the 59th quadrennial presidential election.
On the same note, Axi chief global market strategist Stephen Innes said Biden’s victory in the US presidential election would be viewed more favourably than a Donald Trump win from Asia’s perspective.
“My view is that the US dollar will eventually sell off on either outcome, but traders need to respect the market’s initial knee jerk reaction, so I think this is holding traders back from taking on more Asian foreign exchange (FX) risk.
“The Chinese yuan could bounce around on election day, and it could be messy getting stuck on the wrong side of the trade,” said Innes.
He noted that many traders would prefer for the US election’s dust to settle before rebuying the ringgit as the issue of a contested election remained a main concern.
“Positioning is much lighter, so the ringgit could stand to make a bullish break next week, provided the Covid-19 counts start to fall locally. Cautious range next week for the ringgit against the US dollar is between 4.14 – 4.17,” he added.
During the week, Malaysia’s positive September exports helped the ringgit claim the title as Asia’s best-performing currency for the day.
Nonetheless, the US dollar index rose over one percent as global risk appetites deteriorated amidst the resurgence in Covid-19 cases in major economies, while hopes of a pre-election US fiscal stimulus deal began to wane.
On a Friday-to-Friday basis, the ringgit declined against the US dollar to 4.1530/1570 from 4.1500/1600 in the previous week.
The local currency traded mostly higher against other major currencies.
It appreciated against the Singapore dollar to 3.0427/0468 from 3.0593/0678 Friday last week but eased versus the yen to 3.9757/9814 from 3.9664/9771.
The ringgit strengthened vis-a-vis the British pound to 5.3806/3866 from 5.4286/4434 a week earlier and traded firmer against the euro at 4.8470/8529 from 4.9153/9288 previously.
The market was closed on Thursday for the Maulidur Rasul public holiday.