Heightened US election uncertainty and geopolitical tensions signal further downside
The ringgit continued to depreciate, trading within a narrow range of 4.30-4.31 against the USD this week, driven by growing expectations of a potential pause in the Fed's November meeting (~9.0%), amid an upbeat outlook for the US economy. This aligns with our projections, particularly after Fed Governor Waller urged caution regarding future rate cuts. The USD also benefited from safe haven flows due to the ongoing Middle East crisis. Additionally, China's stimulus efforts fell short of expectations, disappointing markets and triggering another wave of capital outflows, which weighed on sentiment and pressured Asian currencies. The 10-year MGS-UST spread has now widened to -30.0 bps.
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