Ringgit expected to trend downward on lack of catalysts

KUALA LUMPUR: The ringgit is expected to trend downward against the US dollar on the lack of catalysts, according to an analyst.

He said there were multiple factors that seemed to negatively affect the economic recovery momentum.

Meanwhile, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said despite the rise in the overnight policy rate and better-than-expected Gross Domestic Product performance for the first quarter (1Q) of 2022, the US dollar-ringgit pair continued to linger on the weaker side.

“Clearly, market participants are engrossed with the US Federal Reserve’s (Fed) possible move to tighten their grip on monetary policy.

“Global equities have severely tanked while the 10-year US Treasury yields were below the three per cent level as investors were seeking refuge against volatility,” he told Bernama.

He said at present, the ringgit’s resistance level against the US dollar was located at RM4.447 while the support level was at RM4.340.

“Technical indicators indicate that the US dollar/ringgit is in the oversold region, suggesting that a possible correction could happen.

“However, concern over aggressive monetary tightening in the United States will dominate market sentiment next week,” he added.

On Friday, Bank Negara Malaysia announced that the economy rebounded in 1Q22 with a five per cent growth versus a contraction of 0.5 per cent in the same quarter last year, buoyed by improving domestic demand as economic activities continued to normalise with the easing of containment measures.

Its governor Tan Sri Nor Shamsiah Mohd Yunus said the domestic economy was expected to improve further this year, with growth projected to be between 5.3 per cent and 6.3 per cent in 2022, supported by the stronger domestic demand, continued expansion in external demand and further improvement in the labour market.