The ringgit counted itself amongst Asia’s gainers against the US dollar for the week. Malaysia’s better-than-expected December external trade figures exceeded market expectations, which helped push the currency towards the 4.04 mark versus the dollar before the weekend, despite having tested its 50-day simple moving average (SMA) support level against the greenback earlier in the holiday-shortened week. Looking at Asian currencies, the Chinese yuan led regional gains, while the likes of the Taiwanese dollar, Singapore dollar, and the South Korean won posted declines for the week.
The GameStop saga has certainly captured the market’s attention, though it has held little sway thus far over other asses. However, should those price dislocations become greater and force more volatility, that may trigger heightened risk aversion which could see investors flocking to the safety of the US dollar.
The fundamental investor will continue eyeing the hard economic data, including China’s PMI figures and the Euro-area’s 4Q GDP. Signs that the global economic recovery is losing more momentum may spur declines in riskier assets.
The January US non-farm payrolls that’s due on Friday will arguably grab the spotlight on the US economic calendar, and is set to be interpreted in light of the slightly bearish tone adopted by Fed chair Jerome Powell after this month’s FOMC meeting. With Powell cautioning that the world’s largest economy is still a long way from a full recovery, more evidence of a lackluster jobs market may prompt market participants to see more unwinding of the reflation trade.
For the week ahead, US dollar-ringgit could test its 50-day SMA resistance level once more, with a sustained breach potentially bringing the 12 January high of 4.076 into play. Ringgit bulls may continue eyeing the 4.00 psychological level, although they must first overcome lingering concerns over the domestic economic conditions which remain dependent on the health response to the virus-curbing measures.
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