A customer counts ringgit bills in denominations of 1, 50 and 100 at the service window of a money changer in Kuala Lumpur, 22 July 2005. The Malaysian ringgit was appreciating gradually in cautious trade 22 July after the Malaysian central bank responded to China's yuan revaluation by scrapping the dollar peg in favour of a managed float. AFP PHOTO/TENGKU BAHAR

KUALA LUMPUR – The ringgit is likely to extend its recovery against the US dollar next week, as market sentiment has shifted more towards emerging market currencies, dealers said.

Affin Hwang Investment Bank Vice-President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the ringgit was expected to strengthen in the medium term after the US dollar retreated.

“Ringgit should test the RM4.30/US Dollar threshold on slower expectations of further US Federal Reserve rate hike in June, while Bank Negara Malaysia is likely to step in at any further weakness, especially if ringgit trend towards the RM4.50/US dollar psychological barrier.

“Bank Negara has so far shown commitment to defending the ringgit against exchange rate volatility via open market operations,” he told Bernama.

Nazri said that the local currency should also get support from stable oil prices with Brent crude settling at US$51.74 a barrel, while metal prices strengthened as the dollar dipped, with gold edged up one percent at US$1,226 an ounce and copper rose 0.7% to US$5,908 a tonne.

The ringgit has begun its recovery phase this week, benefiting from the uncertainty over the US interest rate outlook for this year.

Despite having decided to increase the interest rate by 25 basis-point after the two-day Fed meeting on Wednesday, the Fed failed to give a hawkish message on its projections of three rate increases in 2017.

Most investors have indicated that there would be no pick-up in the pace of the US monetary tightening this year.

For the week just ended, the ringgit moved between 4.4480 and 4.4340 against the US dollar. On a Friday-to-Friday basis, the ringgit traded higher at 4.4340/4370 against the greenback from 4.4490/4540.

Against other major currencies, the local note finished mostly higher.

The ringgit depreciated versus the Singapore dollar to 3.1638/1682 from 3.1384/1424 last week and weakened against the yen to 3.9156/9196 from 3.8566/8620.

Against the British pound, it slipped to 5.4933/4983 from 5.4167/4241, but declined against the euro at 4.7767/7818 from 4.7217/7275.