The US Dollar finished sharply lower against all major forex counterparts on a week of mediocre economic data and a noteworthy shift in rhetoric from the US Federal Reserve. Dollar Ends the Week at Seven-Month Lows.
The highly-anticipated Federal Open Market Committee (FOMC) interest rate announcement and statement forced sharp moves across financial markets on Tuesday.
Officials strongly suggested that they stood ready to restart Quantitative Easing (QE) measures if the need presented itself, and an especially dovish tone on inflation implied that such a move could come sooner than later. Given that the US Dollar fell precipitously on the first wave of QE, the prospect of QE Part 2 could spark continued USD weakness against major counterparts.
USD/MYR pair fell sharply on Wednesday to a support level at 3.089 and breached that level by the end of the day.
Currency intervention by Asian Central Banks (including Bank Negara and Bank of Japan) on Thursday and during Friday’s Asian session managed to contain the US Dollar fall but uninspiring US economic data dragged US dollar down. USD/MYR went lower to 3.082 on the week closing.
FTSE Group, a global index provider, on Friday upgraded Malaysia to “advanced emerging market” status and Morgan Stanley on Sept. 20 raised its assessment of the nation’s stocks to “overweight.”
According to Barclays Capital Plc, FTSE upgrade is one of the key catalysts for further appreciation of the ringgit. Barclay also noted that the upgrade may attract as much as US$3 billion of new funds to Malaysian assets.
Technically, USD/MYR pair is still on the bearish path with support at 3.072. Resistance is seen at 3.098 and the next higher resistance level at 3.118.
