Overview

• Performance: The USD held firm as expected, keeping the ringgit within a narrow 4.50-4.51 range this week. The USD Index briefly surged toward 110.0 on Monday, driven by stronger-than-expected NFP report but eased to 109.0 following a soft US core PPI print.
• Market Dynamics: Sentiment toward the USD was mixed. Reports of Trump's team considering gradual tariff hikes to enhance negotiating leverage while limiting inflationary pressures, added to policy uncertainty. Meanwhile, core CPI undershot expectations, but remained above 3.0% YoY, raising doubts over the Fed's pace of rate cuts.
• Domestic Macro: Malaysia's advanced 4Q24 GDP, due today, is expected to moderate to 4.6%, bringing full-year growth to a solid 5.0% (Consensus 4Q24: 5.2%; 2024: 5.2%). This, alongside a strong external trade outlook and BNM's policy status quo, could help shield the ringgit from external pressures next week.
• Outlook: All in all, the ringgit is expected to trade around the 4.50/USD level as markets brace for Trump's inauguration on Jan 20th. A wave of executive orders may heighten policy uncertainty, keeping risk-on assets in check. Meanwhile, geopolitical risks, including the Israel-Hamas ceasefire, remain in focus.
• Technical: The USDMYR remains neutral, trading near its five-day EMA at 4.502, with the RSI in mid-range zone. The pair is likely to fluctuate between (S1) 4.497 and (R1) 4.508 as Trump's resurgence influences market sentiment. EMA (5): 5-day Exponential Moving Average EMA gives more weight to the most recent periods, places more emphasis on what has been happening lately. Old data points retain a multiplier even if they are outside of the selected data series length.

Source: Kenanga Research - 17 Jan 2025