Ringgit helped by FTSE Russell’s decision on Malaysian bonds

KUALA LUMPUR: The FTSE Russell’s decision to keep Malaysian bonds on its watch list has helped maintain a key overhang over the ringgit for months to come, FXTM analyst Han Tan said.

Tan said the US dollar-ringgit pair was setting for a new sevenmonth low only to reverse course last week as several factors weighed on the ringgit’s fortunes.

“Equity markets worldwide are set to post their first monthly decline since the market crash in March, and the risk aversion has restored the US dollar’s status as a safe-haven asset, which in turn is exerting downward pressure on the rest of the currency universe.

“Global investors must remain vigilant and brace for potentially more volatility, induced via political channels, over the nearterm,” he said in a report.

Tan said market participants were expected to pay close attention to the first US presidential TV debate between President Donald Trump and Democratic challenger Joe Biden.

He said with the November election set to be one of the most fraught battles for the White House, it would be imperative for investors to try and get a grasp of potential outcomes as early as possible.

He, however, said better-thanexpected data out of the Chinese economy over the coming days, along with an increase in the likelihood of the next round of US fiscal stimulus being passed sooner rather than later, could help risk appetite punch through the political and economic woes that permeate investor sentiment.

For this week, a break above the month-to-date high of 4.1757 could see the US dollar versus the ringgit making its way towards its 50-day moving average (MA), which currently resides around the 4.19 mark.

“The currency pair’s 50-MA hasn’t been truly tested as a resistance level since early June, when it gave up its role as a key support level, but heightened political uncertainty or risk aversion might just do the trick.

“However, the 4.1 psychological level could come back into focus over the near term should the cloud of political concerns dissipate and investors’ risk appetite can make up for lost ground,” Tan said.