The risk sentiment for the ringgit remains fragile and despite the improving prospects of trade and tariff war reconciliation, says OANDA heading of trading for Asia-Pacific Stephen Innes.
He said on Monday that much of the ringgit appeal has come from its undervalued call, and this should continue to gain interest among investors.
“But with Bank Negara likely to stay neutral the remainder of the year in the wake of tepid inflation readings, it will be up to the US dollar to do the heavy lifting to reach the 3.80 US$-ringgit levels.
“Inflows ahead of the election remain tepid, as such; the ringgit should remain confined to the upper end of its recent trading ranges,” he said.
On the equities markets, Innes said they were taking the surgical strike at the heart of Syria's chemical weapon program in stride as traders had priced in this outcome with a high degree of probability.
Given the universal condemnation and overwhelming support for this military action, it's improbable there will be retaliation from Russia or Iran, Syria's principal backers, and for the time being, the US-UK -France alliance is considering this a mission accomplished.
“With trade war and now Syria fatigue likely to set in, however, it’s best not to get too comfortable at this point as market risk sentiment swings will remain large this week.
“Even more so with the market focusing on positive trade headlines and Syria escalation, investors could be caught flatfooted to any negative headline turns in the days ahead.
“Global political concerns look likely to remain a focus in the week ahead, so we should expect the markets to stay at the mercy of headlines risk. However, so far the market is showing little appetite to chase risk assets higher,” he pointed out.
On the trade wars, Innes said it was far too early to put trade tariff on the back burner anytime soon as this tit-for-tat escalation is a lot more intense than anyone expected.
“Moreover, with the level of investor complacency running high the market is very prone to headline risk. Especially with China making overtones for Japan’ cooperation in dealing with US restriction on steel imports,” he said.