KUALA LUMPUR: The ringgit is expected to strengthen against the US dollar next week, driven by signals from the US Federal Reserve (Fed) suggesting potential interest rate cuts in September.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the local currency could gradually appreciate, possibly trading between RM4.3650 and RM4.3750.
"Key data to watch next week will be the US Personal Consumption Expenditure (PCE) Price Index for July, both headline and core, as it will provide further insight into the US dollar's direction.
"So far, June's headline and core PCE inflation have eased to 2.5 per cent and 2.6 per cent, respectively," he told Bernama.
Meanwhile, Kenanga Investment Bank Bhd anticipates continued capital inflows into Malaysia, driven by a strong domestic outlook, a slowing US economy and the potential for global monetary easing, all of which could bolster the ringgit.
In a note, the investment bank highlighted that mounting evidence of a slowing US economy, cooling inflation and a dovish tone from the Fed could weaken the US dollar index further, potentially keeping it around the 101.0 level—an outcome favourable for the ringgit.
"With uncertainty surrounding the Fed's rate cuts, both in terms of scale and frequency and the central bank's data-driven approach, next week's key US data, particularly core PCE, will be closely monitored by the markets," the firm added.
Fed chairman Jerome Powell, in his remarks on Friday, delivered an unequivocal signal that the long-anticipated US interest rate cut is likely to occur next month.
On Aug 19, the ringgit reached an 18-month high, closing at RM4.3805, fueled by concerns about a potential US interest rate cut. As a result, the ringgit has appreciated by 5.01 per cent against the US dollar year-to-date.
On a Friday-to-Friday basis, the ringgit strengthened to 4.3720/3775 against the US dollar from 4.4295/4350 a week ago.
The local currency, however, traded mostly lower against other major currencies.
It gained against the euro, closing at 4.8604/8665 from 4.8680/8741, but depreciated against the British pound to 5.7391/7463 from 5.7167/7238, and weakened vis-a-vis the Japanese yen to 2.9914/9956 from 2.9792/9833 a week earlier.
The ringgit traded mixed against ASEAN currencies.
It appreciated vis-a-vis the Singapore dollar to 3.3410/3454 from 3.3582/3627 and remained flat against the Indonesian rupiah at 282.1/282.7 from 282.2/282.7.
However, it declined against the Thai baht to 12.7575/7810 from 12.6445/6656 and weakened against the Philippine peso to 7.75/7.76 compared with 7.74/7.75 a week earlier.
-- BERNAMA
TAGS: Ringgit, US dollar, Mohd Afzanizam Abdul Rashid, Kenanga Investment Bank Bhd, PCE