HAWKISH FED BETS, OIL SHOCK SET TO KEEP RINGGIT AROUND 4.00 AGAINST US DOLLAR NEXT WEEK

By Fatin Umairah Abdul Hamid

KUALA LUMPUR, March 28 (Bernama) -- The ringgit is expected to trade around the 4.00 level against the US dollar next week, as expectations of a prolonged West Asia conflict weigh on the currency.

Kenanga Investment Bank Bhd (Kenanga IB) said investors are likely to remain overweight on the greenback as a hedge against renewed escalation once the US 10-day pause on strikes against Iran’s energy facilities ends.  

“The ringgit’s initial outperformance faded in a late-cycle correction, as the benchmark Brent crude oil holding near US$100 per barrel has heightened US inflation concerns. 

“Consequently, investors have priced in a more hawkish Federal Reserve (Fed), supporting the greenback,” it said in a note on Friday.

Kenanga IB anticipates the West Asia conflict to extend into the third quarter of 2026 (3Q 2026), keeping the Fed restrictive until 4Q 2026.

Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said that Donald Trump’s 10-day extension for Iran to reopen the Strait of Hormuz failed to calm the crude oil market.

He said that the growing concerns among Fed members regarding rising inflation risks, which now outweigh worries about weak employment, have created a policy dilemma for the US central bank.

“As such, the ringgit is likely to stay weak, maintaining its current trajectory of around RM4.00 versus the US dollar in light of the heightened economic fallout from the oil shock,” Mohd Afzanizam told Bernama.

Over the past week, the ringgit has fluctuated between RM3.92 and RM3.99 against the US dollar. However, it lost momentum and reached RM4.00 at midday on Friday due to increasing demand for the safe-haven dollar. This trend stemmed from growing scepticism regarding a potential ceasefire in Iran.

On a week-on-week basis, the ringgit settled lower against the US dollar to close at 4.0105/0140 on Friday, compared with 3.9330/9415 at the end of the previous trading week.

The local note traded lower against a basket of major currencies this week.

It edged down versus the Japanese yen to 2.5084/5109 from 2.4716/4771 last Thursday, slipped vis-a-vis the British pound to 5.3368/3414 from 5.2246/2359 previously, and eased against the euro to 4.6197/6237 from 4.5139/5237.

The ringgit also traded lower against its ASEAN peers.

The local currency depreciated versus the Singapore dollar to 3.1164/1194 from 3.0671/0740 at the end of last week, fell against the Thai baht to 12.1903/2077 from 11.9872/12.0204 last Thursday, declined vis-a-vis the Indonesian rupiah to 236.1/236.5 from 231.4/232.0 previously, and decreased against the Philippine peso to 6.62/6.63 from 6.54/6.56.

-- BERNAMA