RINGGIT RISES TO STRONGEST LEVEL IN A YEAR AGAINST GREENBACK

Currency set to trade between 3.80 and 3.90 against US$ in Q2 or Q3 next year

RUPA DAMODARAN KUALA LUMPUR bt@mediaprima.com.my

THE ringgit rose to its strongest position in a year versus the United States dollar yesterday due to improved oil prices. Catching up with the regional peers, the ringgit was expected to strengthen the most next year.

The local currency opened at 4.1885 versus the US dollar yesterday morning before closing higher at 4.1765 versus Tuesday’s close of 4.1935.

Although the Brent crude futures were lower by one per cent at US$61.61 (RM257.07) per barrel from their last close, analysts were encouraged by the return of oil prices to the 2015 levels.

Maybank FX said Bank Negara Malaysia’s “hawkish tilt” towards the Overnight Policy Rate as also one of the top drivers of the ringgit.

Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi’s comment about the general election next year was also a contributing factor.

The continuity of the US Federal Reserve’s monetary policy and subdued inflationary pressures as well as a backdrop of a recovery in the global economy should bode well for trade-dependent Malaysia and the ringgit.

Forex analysts told the Bloomberg that the ringgit would strengthen in the coming months due to undervaluation, healthier foreign exchange reserves and stabilisation in imports and short-term debt coverage, among others

ForexTime Ltd analyst said last week that the ringgit was headed towards the psychological level of 4.00, adding that the worst was over for the ringgit.

He said the best scenario for the ringgit would probably be between 3.80 and 3.90 and that may likely happen in quarter two or quarter three next year.

The stronger ringgit outlook against the greenback was supported by improving sentiments.

Bank Negara Malaysia’s external reserves improved to US$101.4 billion at end-October, net foreign inflow into equities market at RM9.8 billion at end-October, foreign holdings in Malaysian Government Securities at 42.7 per cent and a more stable foreign currency deposits at around seven per cent.