Ringgit to stay firm against the US dollar

PETALING JAYA: The ringgit is expected to stay firm against the US dollar at the 4.07-4.10 levels by year-end.

Ambank group chief economist and Ambank Research head Anthony Dass attributed this to the continued weakness in the US dollar, which he said would provide positive impetus for the local currency’s strength.

He said on the trade side, he expected exports for the year to contract between 2.5% and 3.0%, adding that external reserves are at a healthy Us$104.9bil or 8.6 months of retained imports which would bode well for the ringgit.

“With a cumulative surplus of Rm147bil in the first 10 months of the year, it was Rm1.3bil higher than the year-ago period and this would lend support to the ringgit.

“Also, after Budget 2021 has been cleared at the policy level, the focus now is at the committee level which is the third stage. Should this be cleared, it will help soften uncertainties for a period of time,” Dass said.

Trade surplus in October widened to Rm22.12bil, registering a double-digit growth of 25.9% year-on-year (y-o-y), the highest ever recorded. It was supported by the increase in exports and fall in imports.

Exports reached Rm91.05bil, increasing by 0.2% y-o-y and 2.4% month-on-month (m-o-m). This was the third highest export value recorded thus far. The expansion was supported mainly by higher exports to the US, China, India and the UK.

Imports totalled Rm68.93bil, decreasing by 6% y-oy or or 2.9% m-o-m. Electronics led the bounce in exports, growing by 0.2% y-o-y and 2.4% m-o-m in October.

These benefited from the recovery in Asian exports that have gained momentum in recent months.

Commodities, the other dominant export category, was a mixed bag. Palm oil and rubber exports posted strong growth but the fuel cluster (crude petroleum, petroleum products and liquefied natural gas) continued to remain weak from global demand and prices.

Palm oil and rubber exports registered strong growth at 46.5% y-o-y and 127.3% y-o-y, respectively. India remains the largest palm oil importer, buying around 424,000 tonnes or an increase by 13.1% as compared to the previous month.

Contributions from palm oil and rubber to the total exports are 6% and 5.7% in October. The rise in rubber products contribution is due to the windfall gains from the current pandemic virus.

Imports fell for the eight straight month by 6.0% y-o-y. The drag came from iron and steel products (-30.0% y-o-y ) and manufactures of metal (-18.2% y-o-y). They were the weak spots in imports.

Both capital and intermediate imports shrank by 17.1% y-o-y and 6.1% y-o-y in October from - 2.2% y-o-y and -17.7% y-o-y, respectively. Meanwhile, consumption goods climbed by 6.5% y-o-y from 11.2% y-o-y in September.

Meanwhile, Publicinvest Research said trade could make further recoveries, thanks to the recent breakthrough in Covid-19 vaccine development. The manufacturers are set to produce up to 1.3 billion doses of vaccine in 2021 covering about 17% of global population.