Performance: As anticipated, the ringgit closed 2024 slightly stronger than expected at 4.472, reflecting a 2.7% appreciation from the end-2023 level. On a weekly basis, the ringgit slipped 0.2% against the greenback as the USD index (DXY) surged past 109.0, a more than two-year high. The DXY rally was driven by US economic optimism and investor positioning for a stronger USD ahead of Trump's return to power.

Market Dynamics: Weakness in the EUR, caused by expectations of Fed-ECB policy divergence and eurozone economic fragility, further bolstered the DXY, pressuring emerging-market currencies.

Portfolio Flows: Portfolio repositioning ahead of Trump's return to the White House led to RM0.8b in foreign outflows from Malaysia's debt market in the first two trading days of 2025, pushing the ringgit closer to the 4.50/USD mark.

Data Impact: A drop in US unemployment claims highlighted a resilient labour market ahead of next week's jobs data, reinforcing perceptions of US economic strength. This has led markets to price in just one 25 bps rate cut by the Fed this year.

Outlook: While Malaysia's macroeconomic fundamentals remain solid, robust US data and investor caution over Trump's resurgence may sustain demand for safe-haven assets, pressuring the ringgit to trade above 4.50/USD.

The USDMYR remains neutral and may hover near its 5- day EMA at 4.479, as the RSI is holding in mid-range territory. A sustained break above (R1) 4.495 appears likely, driven by emerging MYR sellers as risk-off mood dominates the FX market.