The dollar kept losing value against the Ringgit this Thursday after the unemployment rate in Malaysia showed a better-than-expected number, which made the Ringgit gain ground against the Dollar and most of its counterparts. The USDMYR is now traded at 4.1160 and as the price already broke below the 4,1200, it could now fall until the 4.1000 level in the next few days. Investors will watch the Core CPI and the Initial Jobless Claims, both from the US. Those could accelerate the down trend in the USDMYR.
The market is holding its breath when it comes to the inflation in the US. We all know that inflation is a bad thing, but the US is convinced that the inflation that is happening there is temporary and not a threat. What does it mean for the investors? Well, every informed investor out there knows that once inflation knocks at your door, it is a little bit hard to send it away. Unless you are the country that has the ability to print the money with which the whole world trades, in this case you can “export” the inflation to other countries. What we need to know is that there is a party happening now and this is a party made for the US companies, which are growing at top speed, hiring people and pushing back the economic effects of the Covid-19 crisis. This party is meant to bring employment to the levels before Covid and the FED is determined to keep the interest rate unchanged until that goal is achieved. But, coming back to the lines from the beginning of the text, why is the market holding its breath? Because today we will have the numbers for the Core CPI, one of the main indicators that is going to tell us whether or not there is inflation in the US. If the numbers come higher than expected, it means inflation is at the gate, then the FED will likely have to increase interest rates before 2023 and the downward trend in the US Dollar could end. But if the numbers come only a little above the expectations or lower than expected, well, then the money party could go on (with stimulus and money printing). That is why the markets have been so undefined lately. Should the number come much higher than expected pairs like USDSGD and USDMYR could go up (in this case, the Dollar gains value in anticipation of an increase in the interest rates). Otherwise, the selling pressure will still be in place and the USDSGD could go to the 1.3050 in the next few days.
