Bullish trend for M’sia, with ringgit soaring — Economist

KUALA LUMPUR: It seems like a bull run for the ringgit as it has been hitting new highs amid the country’s solid fundamentals, backed by export growth with expectations riding high that the local currency will continue to strengthen further albeit moderately.

The ringgit breached the 4.0 psychologically level versus the US dollar and as at 3pm yesterday, it was traded at a fresh high of 3.9940/9980 against the greenback, gaining 0.3 per cent.

Sunway University Business School Economics professor Dr Yeah Kim Leng said the current level is a reflection of the strengthening economy both at global and domestic levels.

“Strong growth, as well as better oil prices, underpinned the ringgit’s performance,” he told Bernama when contacted yesterday.

On Wednesday, oil prices traded above US$ 67 per barrel since 2015.

The Ministry of International Trade and Industry announced on Friday that Malaysia’s exports rose to an all-time high of RM83.50 billion in November last year – the highest monthly export value ever recorded after the RM82.62 billion in March last year.

Yeah said the local note was undervalued for some time; thus the fast pace of the ringgit appreciation was a sign of its fundamental adjustment.

“We see that the ringgit has bucked its trading partners’ currencies now, and correction is expected to take place thereafter and realign the local note to make it move in line with the current trade- weighted real effective exchange rate,” he added.

Earlier this week, Prime Minister Datuk Seri Najib Tun Razak said the government would stick to its decision on to repeg the ringgit and focus on strengthening the fundamentals as it would reflect the real value of the ringgit.

The prime minister cited two factors beyond the control of the government that had affected the ringgit – firstly, the policies adopted by developed countries, especially the US in terms of their interest rate; and secondly, slumping oil prices.

Malaysian Association of Technical Analysts president Nik Ihsan Raja Abdullah said the movement of the local note was very bullish of late, continuing growth momentum since last year.

“In the mid-term we anticipate a wave of bullish outlook, while in the near term, testing the 3.9000 and 3.8800 against the dollar, riding on an expected interest rate increase from Bank Negara Malaysia ( BNM),” he said.

Nik Ihsan said the subdued dollar might be lent a hand on today’s release of US Non-Farm Payroll data – however, the effects on the ringgit would exist in a minor pullback.

He said the local note had performed well, on a strong footing, evident through positive economic data and stellar gross domestic product ( GDP) growth figures.

Malaysia’s economy grew 6.2 per cent in the third quarter ( Q3) of last year versus 4.3 per cent in the same period in 2016, while in Q2 the GDP registered a 5.8 per cent growth from 5.6 per cent in Q1.

BNM had said that given the continued strong performance in the quarter, Malaysia’s economy was on course to register close to the upper range of the official projection of 5.2 to 5.7 per cent in 2017, supported by domestic demand.

Nik Ihsan said the US Federal Reserves and BNM played a vital role in determining the strength and weakness of each currency by raising and lowering interest rates, and it would be a tricky feat in the mid-term.

The ringgit opened higher against the US dollar yesterday at 4.0000/0030, against the greenback from 4.0050/0080 at the close on Thursday. — Bernama