Ringgit expected to stabilise against the dollar this week

This is likely due to a more compelling outlook for the global markets where the focus remains on the Fed’s meeting this week

by LYDIA NATHAN / Pic by BLOOMBERG

THE ringgit will most likely stabilise against the US dollar this week, due to a more compelling outlook of global markets as the focus remains on the US Federal Reserve’s (Fed) meeting this week.

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said after experiencing a sharp appreciation, the ringgit succumbed to the selling pressure during this week, which could have been motivated by profit-taking activities in light of the rapid increase in the value of the ringgit.

He added that the sharp appreciation was driven by a few factors, including the memorandum of understanding (MoU) signed between the Pakatan Harapan and the government.

He said the signing meant that policy making would be smoother especially in the context of the sustainable economic recovery.

“This month, the government will table the medium-term plans which are the 12th Malaysia Plan. The country needs credible and well executed economic plans that would enable all Malaysians to earn a better living beyond the pandemic shocks.

“So, political stability would be a prerequisite and this appears to have been addressed via the MoU,” he told The Malaysian Reserve recently.

The Brent crude prices have also been hovering at more than US$70 (RM292) per barrel, which proved good for the government’s revenue.

“There are also crude palm oil prices which have stayed at elevated levels of more than RM4,500 per metric tonne which can be earnings accretive for planters.

“There is also the Fed’s decision to reduce its asset purchases program by the end of the year. So, all these factors will be convoluted in the movement of the ringgit,” he said.

However, the ringgit fell at the opening bell on Sept 15, 2021 as investors moved into safer avenues like the Japanese yen after the US inflation data for August revealed a slower-than-expected expansion pace.

Reports stated that ActivTrades trader Dyogenes Rodrigues quoted saying the US Consumer Price Index grew 5.3% last month, showing lower-than-expected inflation in the world’s largest economy.

“This may cause the Fed to take a little longer to start the tapering process, which could be positive for the greenback,” he told a daily.

Diniz opined that the US dollar-ringgit hike in movement could signal the beginning of an ignition movement, which could bring the currency pair to the 4.2400 level in a few days.

“Still, investors will be paying attention to any details about monetary policy coming from the Fed, as this could completely change the current scenario,” he said.

Mohd Afzanizam added that there could be intermittent volatility for the ringgit from demand depreciation as the appetite to safe haven such as the US dollar could rise momentarily.

“Beyond that, the foreign trading market will also track Malaysian economic recovery and what it means in terms of Bank Negara Malaysia’s monetary policy.

“If the economic recovery becomes more entrenched, then there is a chance that the Overnight Policy Rate might adjust upwards thereby, lending more support to ringgit,” he noted.

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