Federal Reserve’s Hawkish Stance and US Government Shutdown Concerns Weigh on Ringgit
The ringgit has fallen against the US dollar on higher demand for the greenback as US 10-year bond yields hit new highs. Analysts say the Federal Reserve’s hawkish stance and concerns over a possible US government shutdown are weighing on the ringgit. However, the ringgit remains strong against other major currencies.
Stephen Innes, the managing partner of SPI Asset Management, has stated that the recent increase in US yields to a new high is harming the ringgit. He explained that the FOMC’s hawkish stance, which set higher expectations for rate increases in the coming year, has surprised the markets. Consequently, the possibility of interest rates remaining at elevated levels for an extended period has been re-evaluated. The US 10-year bond yields have risen 10 basis points to 4.53%, indicating the market’s reaction.
Meanwhile, Dr. Mohd Afzanizam Abdul Rashid, the chief economist of Bank Muamalat Malaysia Bhd, stated that the ringgit continues to remain weak against the US dollar due to concerns over a possible US government shutdown by Oct 1. The US Congress is supposed to agree on the spending bill by the end of September, which otherwise could result in a government shutdown.
In addition, the US Federal Reserve’s restrictive monetary policy has bolstered US dollar demand, according to Mohd Afzanizam. Market participants have become guarded, and risk-off sentiments continue to prevail, he said.
Ringgit Remains Strong Against Other Major Currencies
Despite the weakness against the US dollar, the ringgit remains strong against other major currencies. Markets Strategist Quek Ser Leang at UOB Group believes that there is an extra range bound on the table for USD/MYR in the near term.
Last Monday (18 Sep, spot at 4.6835), they highlighted that “there is room for USD/MYR to edge above June’s high of 4.6880.” They also mentioned that “The next major resistance at 4.7000 is unlikely to come into view.” Their view was not wrong, as USD/MYR rose to a high of 4.6960. Despite the advance, there is no increase in momentum, and USD/MYR is unlikely to rise further.
Conclusion:
The ringgit has fallen against the US dollar on higher demand for the greenback as US 10-year bond yields hit new highs. Analysts say the Federal Reserve’s hawkish stance and concerns over a possible US government shutdown are weighing on the ringgit. However, the ringgit remains strong against other major currencies.
USD/MYR Long (Buy)
Enter At: 4.7033
T.P_1: 4.7492
T.P_2: 4.7934
T.P_3: 4.8462
T.P_4: 4.8796
T.P_5: 4.9242
T.P_6: 4.9604
T.P_7: 4.9987
S.L: 4.5208
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