KUALA LUMPUR: Signals reinforcing the "no urgency to cut rates" narrative could push the ringgit versus the US dollar closer to the 4.50 threshold, according to Kenanga Research.
The firm, in its weekly ringgit outlook today, said while the greenback faces risks of a technical correction, a significant retracement is unlikely in the near term.
"The greenback remains supported by factors such as the repricing of US rates, speculative positioning ahead of Trump 2.0, and safe-haven demand from heightened geopolitical tensions, particularly the Russia-Ukraine conflict.
"With no significant domestic catalysts on the horizon, the ringgit is likely to be influenced by external factors," Kenanga Research said, adding that key market focus areas include US core inflation data and the Federal Open Market Committe minutes.
Despite the USD index trading stronger close to the 107.0 level, the ringgit appreciated slightly so far this week, trading within the 4.46-4.48 range against the dollar.
Kenanga Research said the resilience may partly reflect foreign currency exchange intervention and the repatriation of overseas funds.
However, the negative yield differential between the 10-year Malaysian Government Securities and US Treasury widened to -60.0 basis points (bps) compared to -37.0 bps a month ago, prompting RM1.5 billion in net foreign outflows from Malaysian debt market.
Meanwhile, investors continue to favour USD-long positions as the probability of a December rate cut dropped to 60.0 per cent from 80.0 per cent last week, reflecting signs of US economic resilience.