FOREX: Ringgit To Be Rangebound Against U.S. Dollar Next Week

This is the news from Bernama.com

KUALA LUMPUR, April 5 (Bernama) -- The ringgit is likely to be rangebound against the U.S. dollar next week, with market participants staying on the sidelines due to ongoing fears over the U.S. subprime meltdown, a dealer said.

He expects the local unit to move within a tight range of between 3.1880 and 3.1950 against the greenback next week.

"Market players are staying away from lower yield currencies as the U.S. economy moves closer to a recession due to the deepening subprime mortgage woes," he said.

On a positive note, he expressed optimism over the near-term outlook of the ringgit given rising expectations that the U.S. Federal Reserve will cut its key interest rate by as much as 50 basis points at the next policy meeting scheduled for the end of this month.

"This would further weaken the U.S. dollar, prompting players to invest in countries where interest rates are higher so as to reap better returns on their investments," he said.

He also said that Bank Negara Malaysia will likely allow the ringgit to strengthen further to RM3.10 per U.S. dollar by year end after the 6.7 percent and 7.1 percent gains in 2007 and 2006 in order to contain inflationary pressures.

Noting that Malaysia’s benchmark interest rate is currently at a premium to that of U.S., the dealer said Malaysia's overnight policy rate could be kept steady so that the interest rate differential factor will remain in the ringgit’s favour.

"This will provide a good injection for the further strengthening of the ringgit along with other Asian currencies in the near term," he added.

He added that the strengthening of the local currency will also be in tandem with the expected continued rise of the local stock market.

On a week-to-week basis, the ringgit appreciated against U.S. dollar at 3.1920/1940 compared with the previous Friday's 3.1950/2000.

It was higher against the Singapore dollar at 2.3045/3090 from 2.3142/3197 and was also stronger against the Japanese yen at 3.1155/1187 from 3.1928/1984.

Against the British pound, the ringgit however, weakened at 6.3827/3896 from 6.3772/3882 but it appreciated against the euro at 5.0137/0178 from 5.0344/0432 previously.

-- BERNAMA