The ringgit continued to make inroads against the US dollar, marking an eighth consecutive weekly gain versus the greenback, even as ringgit marches upwards in tandem with rising oil prices. The global currency complex has enjoyed gains against the US dollar – which weakened amid rising expectations for fresh US fiscal stimulus that could boost US inflationary pressures. The heightened risk appetite also served as tailwinds for Asian currencies with many reaching multi-year highs over recent weeks.
Market sentiment could get another boost at the onset of the new week, should the EU approve the Covid-19 vaccine by Pfizer/BioNTech, possibly on Monday. As the vaccine’s rollout gathers pace that should form a stronger base for the global economic recovery, which should translate into more risk-taking activities in the markets. Keep in mind that market volumes are expected to peter out heading towards the Christmas weekend, and the thinner liquidity could lend itself to exaggerated price movements.
Investors are set to continue monitoring the respective fates of the next US fiscal stimulus package and the post-Brexit trade deal, which remains unresolved at the time of writing. Should negotiators walk away from the table empty-handed, that may prompt global risk assets to unwind recent gains.
The days leading up to the Christmas break will see a flurry of US economic data releases, featuring the final reading of 3Q GDP, November personal income and spending levels, as well as the latest weekly jobless claims print. However, investors are expected to look past these data releases, barring any outsized deviations from market expectations, as they cling on to hope more fiscal stimulus will soon arrive.
For the week ahead, US dollar-ringgit is expected to stay the course towards the psychologically-important 4.00 level, provided that the risk-on narrative that currently permeates global financial market isn’t derailed. Should there be a dollar rebound the US dollar-ringgit may test the 4.05 mark as a resistance level.
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