US dollar-ringgit traded within a tight range, staying mostly within the 4.26 to 4.27 lines.
The Malaysian ringgit was among the group of Asian currencies that ended the week little changed against the dollar, as risk-appetite seized up.
Investor sentiment has been left raw by a relatively choppy week in equity markets, as the US earnings season kicked off.
The mixed signals out of major economies, such as the US and China, highlight the need for tempered optimism when considering the global economy’s recovery.
The guidance out of US-listed companies over the coming weeks are set to continue influencing global market sentiment.
With Wall Street banks so far stockpiling US$35 billion in the last quarter for loan-loss provisions, US weekly jobless claims remaining stubbornly high, and major corporations warning that tens of thousands of employees could be laid off later this year, such concerns may put a lid on risk assets’ gains over the near-term.
The ringgit’s performance against the euro and the pound could see heightened volatility when trading resumes next week.
Brexit talks are set to be held in London on Monday, and should investors sense a greater impasse at the negotiating table, that could see the ringgit extending this week’s gains against sterling.
Euro-ringgit is also set to offer its reaction to this weekend’s talks surrounding the European Union’s proposed 750 billion euros recovery fund.
Should progress be made towards rolling out more fiscal stimulus for the continent, that may extend the Euro’s month-to-date gains against Asian currencies.
For the week ahead, Malaysia is set to report four consecutive months of deflation, with June’s CPI forecasted to come in at minus 1.8 per cent.
This should help Malaysian bonds maintain attractive real yields and uphold foreign demand for onshore fixed-income securities, while also supporting the ringgit.
US dollar-ringgit may attempt to move closer to the 4.25 psychological level should global risk sentiment be able to press on and overcome doubts over the pandemic’s impact on the global economy.
However, should market participants decide to rein back their exposure to risk, Asian currencies could unwind some of their month-to-date gains and place the ringgit on a weaker path against the dollar.
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