KUALA LUMPUR, 20 April 2020 – Despite the risk-on sentiment evident in global stocks last week, the Dollar/Asia complex is laying bare investors’ trepidations that the road to global economic recovery remains tentative. According to FXTM, most Asian currencies posted a loss against the Greenback for the week, with USDMYR advancing 1.4 percent during the period to climb above 4.37.
The better-than-expected growth in Malaysia’s February industrial production, which posted a 5.8 percent on-year expansion in contrast to the market-forecasted 0.9 percent print, was unable to offset the downward drag on the Malaysian Ringgit due to the slump in Oil prices.
For the week ahead, USDMYR is expected to remain supported above its 50-day moving average which currently resides at 4.2747 while the currency pair’s upside could face stronger resistance should it enter the 4.38-4.40 range.
Global risk sentiment, the Dollar’s performance, and Oil prices are set to be the primary drivers over the Malaysian Ringgit’s near-term trajectory.
Malaysia’s March CPI due Wednesday is forecasted to show a 0.2 percent on-year decline, as petrol prices fell in line with global Oil benchmarks.
On the global stage, US earnings season will be in full swing this week, which could lead to more gyrations in global stocks.
Equity investors are likely to pin their hopes on the reopening of major economies and may be willing to disregard the dire backward-looking corporate earnings and economic data.
Sustained hopes that the global economic conditions can return to some form of normality, could weigh on safe haven assets over the coming days. However, the path to global economic recovery remains tentative, and could be upended by a swift resurgence of the coronavirus, with a recession still being the base case for the year.
Oil prices are expected to struggle on this slippery slope as demand-side risks remain tilted to the downside, with global demand forecasted to hit its lowest in 30 years.
However, if more major economies enact plans to reopen, that could help Oil prices find a firmer floor in May, aided by the OPEC+ supply cuts kicking in then as well, which could translate into some support for the Malaysian Ringgit.
Written by: Han Tan, Market Analyst at FXTM
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