Ringgit edges up on political stability, relaxed healthcare management

It could be traded within the range of RM4.16 and RM4.20 over the next 2 weeks driven by the positive momentum


THE ringgit is likely to extend its positive momentum for the short term as the investors favour the more stable political environment in the country coupled with the improving Covid-19 health management.

Malacca Securities Sdn Bhd head of research Loui Low said the two factors have boosted the local currency against the US dollar and are expected to continue supporting the ringgit in the short term.

The ringgit/US dollar pair last traded at RM4.153, a two-month high for the local unit with a cooler political environment attracting foreign investors to buy up to RM1 billion in local equity shares last week.

Low added the ringgit could be traded within the range of RM4.16 and RM4.20 over the next two weeks driven by the positive momentum.

“The new government formed under Datuk Seri Ismail Sabri Yaakob as the prime minister has helped stabilise the ringgit against the US dollar.

“In addition, the Health DG Tan Sri Dr Noor Hisham Abdullah said the public healthcare system now has some leeway which has provided some feel-good factor as well as boost confidence for the economy to be reopened,” he told The Malaysian Reserve.

He added while the Covid-19 cases are taking a backseat, the recovery theme seems to be more visible at the moment amid the strengthening of political stability.

“That has caused foreigners to take part more aggressively over the past 10 days in our local equity and that signifies the return of confidence,” he said.

Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said the ringgit could likely sustain its gain in tandem with stronger energy prices.

Adam said there could be further upward pressure for the oil price as developments out of China are reigniting expectations that oil demand would start to rise again at a time when OPEC+ doesn’t have plans to increase supply.

“Stronger demand by large oil consumers like China will push oil prices up if supply is not increased,” he said.

Brent crude for October delivery was last trading at US$73.48 a barrel while US West Texas Intermediate crude was at US$68.46 a barrel.

Kenanga Investment Bank Bhd expects the volatility in the ringgit to persist on oil market uncertainty as the OPEC+ is scheduled to meet today to discuss its oil output policy.

It believes the rising number of daily Covid-19 cases and deaths to continue to exert downward pressure on the local note.

Towards the end of the week, all eyes will be on the US jobs report as signs of solid growth could propel the Dollar Index higher and potentially weaken the ringgit, the investment bank noted in a recent report.

From a technical analysis perspective, Kenanga Investment Bank stated the five-day exponential moving average suggests the local unit could switch to a bearish trend this week, projecting a depreciation against the greenback to RM4.205.

The short-term technical outlook sees an upside bias for the greenback with an immediate resistance level at (R1) 4.214.

Alternatively, a breach below the (S1) 4.179 level could mark a continuation of a bullish ringgit trend.