Likely to strengthen well below 4.55/USD on weak US macro
The ringgit appreciated sharply against the USD, reaching a level not seen in almost a year, with its strongest week-on-week gain (1.9%) since July 2023, primarily due to a weaker greenback. The USD index (DXY) was pressured to trade near the 104.0 level while the 10-year US Treasury (UST) yield trended below 4.00%, narrowing the MGS-UST negative yield differential to 28.1 bps (last week's average: -45.3 bps). Fed Chair Powell's hint at a potential rate cut in September, amid signs of cooling inflation, led to a record RM5.3b in foreign inflows into the Malaysian bond market this week, significantly boosting the ringgit. Additionally, the BoJ's surprise rate hike and hawkish stance further weakened the DXY.
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