Forecasting Dollar and Ringgit 2018

• Correction on US Debt limit,

suspended until March 1,
2019
• Update Tariff on Steel and
Aluminum

12/3/2018 1
 Forecasting Dollar and Ringgit 2018
Ringgit – USDMYR or MYRUSD?
• Currencies are expressed by their ISO-codes. ISO stands
for International Standardization Organization.

• Euro EUR, US-dollar USD, Pound sterling GBP, Japanese

yen JPY, Canadian dollar CAD, Australian dollar AUD,
New-Zealand dollar NZD, Hong Kong dollar HKD,
Singapore dollar SGD, Korean won KRW, Malaysian
Ringgit MYR

12/3/2018 2
 Forecasting Dollar and Ringgit 2018
• There are international conventions regarding which
currency is the base currency and which is the price
currency in an FX quotation.

• The Euro is always quoted as the base currency against

other currencies: EUR/USD, EUR/GBP, EUR/JPY,
EUR/CHF etc.

12/3/2018 3
 Forecasting Dollar and Ringgit 2018
• The British pound and the other currencies of the
Commonwealth are base currency in all exchange rate
quotations except in those cases where the euro is the
counter currency.
• GBPUSD, AUDUSD, GBPAUD

• The US dollar is the base currency in most exchange

rate quotations with the exception of euro and the
currencies of the Commonwealth:
• USDJPY, USDSGD, USDMYR

12/3/2018 4
 Forecasting Dollar and Ringgit 2018
• Exchange rate quotations for which these rules are
properly applied, are referred to as direct quoted FX
rates.
• If these rules are not applied, for instance in the case
of MYR/USD, the quotation is called an indirect quoted
FX

12/3/2018 5
 Forecasting Dollar and Ringgit 2018
• No such things as selling what you do not own
• Its always buying, depending on which chart you are
looking at. The correct term is - EXCHANGE

12/3/2018 6
 Forecasting Dollar and Ringgit 2018
USDMYR
• Currency is a pair.
• There are always two sides of the story in the
movement of the currency. We need to research both
sides.

12/3/2018 7
 Forecasting Dollar and Ringgit 2018
Malaysia
• On Balance, Malaysian economy is doing well as
reported by the IMF

12/3/2018 8
 Forecasting Dollar and Ringgit 2018
Malaysia Debt to GDP and Contingent Liabilities
• Malaysia Debt to GDP is at 53.2%. This is okay.
• But our contingent liabilities – debt guaranteed by the
government – can bring the figure to more than 70%
• The government is committed to long-term fiscal
consolidation but in the event of external shocks,
Ringgit could be under attack.
• For now, the risk of external shock is small
• Also, Growth are strong. Just bear in mind the risk

12/3/2018 9
 Forecasting Dollar and Ringgit 2018
United States of America.
• New Trade Policy, Sell in America, Made in America
• Tax Cuts and Jobs Act 2017
• Infrastructure Spending Bill
• US Debt Ceiling and Government Shutdown
• Federal Reserve (Central Bank) could be behind the
curve.

12/3/2018 10
 Forecasting Dollar and Ringgit 2018
• We had a strong dollar (dollar index- DXY) since April 2011 until
March last year. This is the time Trump talk about renegotiating
NAFTA – Trade Agreement between USA, Canada and Mexico

12/3/2018 11
 Forecasting Dollar and Ringgit 2018
Current Development - Washington
• America budget deficit and a wider current-account
shortfalls are fuelling a renewed wave of dollar
bashing.
• US Tax Cut Bills 2017 – If growth is not factored in –
shows that the Federal deficit would grow by about
$1.5 trillion in the decade after the bill is
implemented.

12/3/2018 12
 Forecasting Dollar and Ringgit 2018
• Republicans argue that the new economic growth from
the bill will in turn generate more revenue, since larger
incomes mean more taxes to collect.
• Deficit is a given, growth is a promise, no guarantee

 Economic data that shows strong economy – we

should see strong dollar and vice-versa

12/3/2018 13
 Forecasting Dollar and Ringgit 2018
• US Spending Bill 2018 – increase spending by $300
billion over the next two years
• Will push budget deficit above $2 trillion in 10 years
time, Committee for a Responsible Budget

• US Infrastructure Bill - The administration is expected

to ask Congress for $200 billion in federal spending on
infrastructure aimed at encouraging more than $1
trillion in state, local and private financing to build and
repair the nation's bridges, highways, waterworks and
other infrastructure.

12/3/2018 14
 Forecasting Dollar and Ringgit 2018
• Half of the $200 billion would go to incentives for
states and cities, and the other half would go to grants,
loans and bonds to fund a project.
• Under the new plan, a project is eligible to receive up
to 20% of its cost in federal funding.

12/3/2018 15
 Forecasting Dollar and Ringgit 2018
US Debt Ceiling
• debt limit is a legislative limit on the amount of
national debt that can be issued by the US Treasury,
thus limiting how much money the federal government
may borrow.
• In 2011, the United States reached a crisis point of near
default on public debt. The delay in raising the debt
ceiling resulted in the first downgrade in the United
States credit rating, a sharp drop in the stock market,
and an increase in borrowing costs.

12/3/2018 16
 Forecasting Dollar and Ringgit 2018
• Under the US Spending bill 2018, the lawmakers
suspend the limit through March 1, 2019.
• A suspension lets the US Treasury borrow as needed.
• The committee for a Responsible Federal Budget
estimates that by March 2019, the new debt limit could
be reset as high as $22 trillion, or $1.5 trillion higher
than where it is today.

 The more the Government borrow (Treasury issuing

Bonds), the weaker the dollar will be

12/3/2018 17
 Forecasting Dollar and Ringgit 2018
USA Internal Politics
• Failure to reach accord on some simmering
disagreements — children's health care, defence and a
border wall — would point at a tougher road ahead to
keep the government operating.
• In September, Trump set the March 5 expiration date
for Deferred Action for Childhood Arrivals (DACA), a
program that offers protections for immigrants in the
U.S. illegally who came to the country as children.

12/3/2018 18
 Forecasting Dollar and Ringgit 2018
• Rep. Nancy Pelosi, the Minority Leader of the United
States House of Representatives spoke for eight hours
and seven minutes on behalf of Dreamers, immigrants,
and the legislative prospects for a path to citizenship.

 At 77, she did so while standing on her feet, without

a break — not even water.

 US Congress will have to address their internal political

problems

12/3/2018 19
 Forecasting Dollar and Ringgit 2018
Trade War
• In January Trump imposes tariffs on solar panels and
washing machines in first major trade action of 2018
• Trump also said US to push for ‘reciprocal tax’ on trade
partners (including ally)
• Recently, Trump signed tariffs on US imports of steels
and Aluminum, with exemption to Canada and Mexico,
subject to new NAFTA.
• Others can apply for exemption too
• In the end, we think only China will be charge with
Tariff and how China response to this is yet unknown.

12/3/2018 20
 Forecasting Dollar and Ringgit 2018
US Balance of Trade – A Soft dollar Policy would reduce
trade deficit quicker.

12/3/2018 21
 Forecasting Dollar and Ringgit 2018
Federal Reserve

12/3/2018 22
 Forecasting Dollar and Ringgit 2018
• It is possible, FED is behind in raising the interest rates
• Risk in 2018, FED raising rates more aggressive than
thought.
• FED could raise in between meetings

12/3/2018 23
 Forecasting Dollar and Ringgit 2018
Conclusion
• In the short-term, at time of writing, market could
response to more lenient Tariff policy (moving from
Trade War with the world to trade war with only China)
• The bigger picture for 2018, more borrowings, higher
deficits and US trade policy could lead to a weaker
Dollar BUT

 strong economic growth and an aggressive Federal

Reserve could see a return to a strong dollar

12/3/2018 24
 Forecasting Dollar and Ringgit 2018
Technical Analysis – Dollar Index
• Dollar Index is forming a falling wedges. It could
reverse to area 95 or even 100

12/3/2018 25
 Forecasting Dollar and Ringgit 2018
• Dollar Index – We need Growth story or a very Hawkish
FED to see a strong dollar. US Trade Policy will likely
see a weakening Dollar over time

12/3/2018 26
 Forecasting Dollar and Ringgit 2018
Technical Analysis – Ringgit
• A Double Top formation could take Ringgit to 3.40, with strong
resistance at 3.70 and 3.50. A temporary strong dollar could take
Ringgit back up to 4.20

12/3/2018 27
 Forecasting Dollar and Ringgit 2018
• Bond market could give us a clue where Dollar and Ringgit is
heading. A sudden rise in Malaysian Bond Yield could mean an
outflows – strong dollar

12/3/2018 28
 Thank You

• You should received this EBook for free. Please forward it to your
friends
• This E-book is prepared by me, Ahmad Sherhan Abu Samah. Please
like my page - https://www.facebook.com/ASASAnalysis/

• Some companies benefit from strong dollar and those with huge
dollar debt may benefit from weak dollar.
• Understanding the factor Fundamentally and Technically could
help company plan their business better.

 If you need explanation, please contact me for an appointment.

http://wasap.my/60162271402

12/3/2018 29
 Thank You

• I am collecting Macro news and may give some

comment in my Telegram group. Join me -
https://goo.gl/2rv9Ac

• I do personal coaching for Macro and Technical

Analysis. Contact me for an appointment.
http://wasap.my/60162271402

12/3/2018 30
 Thank You

12/3/2018 31