By FARA AISYAH / Graphic By TMR
The ringgit is expected to continue its momentum as a hike in the Overnight Policy Rate is expected as early as January next year.
Oanda Corp head of trading for Asia Pacific Stephen Innes the recent ringgit’s appreciation is driven by the robust domestic demand, positive external sector and traders who are already pricing in a January rate hike.
“So, does the lower than expected inflation rate cause me to have second thoughts about my January rate hike call or rethink my year-long bullish view on the ringgit? Absolutely not,” he said in a statement yesterday.
He believes that the monetary authority has implied in focusing on a neutral real policy rate.
“Based on this view, it suggests one hike in January with a possible follow up rate hike in 2018 a plausible projection.
Nonetheless, Innes said monetary policies on distant shores cannot be ignored as weaker currency knock-on effects can raise the cost of servicing foreign currency debt.
He expects dealers to be more reactive to news headlines and economic data releases as opposed to staying in position for a long-term view.
He also foresees extended periods of boredom accentuated by abrupt explosions of volatility around headline risk.
Meanwhile, The Malaysian Reserve recently reported that a stronger ringgit is forecast to eat into the margins of export based stocks next year as the US dollar-denominated revenue is converted to the local currency.