Risk aversion weighs negatively on most Asian currencies, says FXTM

The outlook for ringgit remains positive, provided the ongoing risk-off sentiment is transitory and the global economic rebound can regain back investors’ confidence, said an analyst.

“Should the global economy stage a meaningful recovery following the signing of the United States-China ‘phase one’ trade deal, that could spur more risktaking among investors, which should bode well for Malaysian assets,” said FXTM market analyst Han Tan yesterday.

Han said global investors were monitoring the Middle East situation as it might lead to supplyside disruptions that could trigger another spike in oil prices.

The US-Iran tension has sparked another surge in risk aversion, dampening global equities and other riskier assets.

“Oil prices have spiked following Iran’s retaliation, although Brent and WTI futures have since moderated,” he said.

The Middle East tensions have affected the ringgit as it opened yesterday at 4.11 against the US dollar, from 4.09 on Tuesday.

“US dollar and ringgit pair is expected to test the 4.10 psychological level while adopting an upward bias if risk-off sentiment persists. The immediate resistance level is likely at 4.12, followed by potentially stronger resistance at the 4.14 mark,” he said.

The ringgit closed at 4.10 against the greenback yesterday, compared with 4.0910/0950 on Tuesday.

“Risk aversion often pushes the US dollar higher, which in turn weighs negatively on most Asian currencies,” said Tan.