By MARK RAO / Graphic By TMR
The ringgit closed at a 16-month high against the greenback at RM4.016 for the New Year supported by a hawkish central bank position and overall weaker US dollar narrative.
A senior foreign-exchange (forex) analyst said Bank Negara Malaysia’s preference for a stronger local currency coupled with US President Donald Trump’s fiscal policies implying an overvalued dollar are paving the way for a bullish ringgit run this year.
“Malaysian assets — namely bonds and equities — have also been performing well as easy money becomes available across the globe,” the analyst told The Malaysian Reserve when contacted yesterday.
“Investors are now looking at underperforming markets, of which Malaysia was a standout last year.”
He expects the ringgit is unlikely to break the RM4 mark within the month despite the currency’s strong start to the year, but is positioned to drift towards its fair value of between RM3.80 and RM3.85 within the next three months.
A bullish ringgit is in tandem with a strong equity market with the benchmark FTSE Bursa Malaysia KLCI edging towards the 1,800- point mark, despite falling 14 points yesterday to 1,782.70 after closing at a year high of 1,796 points last Friday.
The forex trader said the index is looking at a next level of 1,800, after which it could test the 2,000-point mark.
The ringgit remains susceptible to global oil prices which are currently supportive of a stronger local currency.
The Brent crude oil contract noted a 2.5% gain over last week to settle at US$66.87 (RM274.17) per barrel for a 17.7% annual increase, driven by product ion cuts and strong demand from China, according to research firm MIDF Amanah Investment Bank Bhd.
“There are no clear risks facing the ringgit other than fresh news that could have a material impact on the Malaysian currency and oil prices,” the source added.
“I believe a decline in oil prices will not be substantial on the overall performance of the ringgit.”