Ringgit finds support from oil, economic reopening


THE ringgit is expected to find support from higher crude oil prices and lower Covid-19 infections in the country.

Oanda Corp Asia Pacific senior market analyst Jeffrey Halley said offshore investors’ interest in South-East Asia and away from North Asia markets could provide supportive fund inflows which will help shore up the local unit.

“The strength may be temporary though if the US Non-Farm Payroll data on Friday solidifies the outlook for the start of a December Fed taper.

“That will likely lead to a stronger US dollar over the next few weeks,” he told The Malaysian Reserve (TMR).

He expects the USD/MYR pair to trade in a choppy 4.1700 to 4.2000 range until the US data is released.

“Looking further out, USD/MYR should rise through the 4.200 level and retest the 4.2400 level before moving towards 4.3500 in the weeks ahead,” he said.

The ringgit closed at RM4.177 against the greenback last Friday. The move favourable ringgit sentiment is underpinned by falling virus infection numbers as the country prepares to loosen movement restrictions further and support economic opening.

In the past 52 weeks, the MYR/USD’s trading range has been between 3.9957 and 4.2450.

According to Trading Economics, global macro models and analyst expectations forecast the local unit to trade at 4.19 by the end of the quarter, and 4.22 in twelve months’ time.

As Putrajaya edges towards announcing Budget 2022 this month, analysts said the outlook on the ringgit is supported by stronger crude oil prices.

“We expect the ringgit will strengthen towards RM4.10 by end of the year supported by the sustained current account surplus and higher oil prices. The improving growth outlook with the reopening of the economy will also support ringgit performance.

“However, the pace of the ringgit’s appreciation may be limited by concerns over slower growth in China and possible policy changes in the advanced markets,” MIDF Research economist Abdul Mui’zz Morhalim told TMR recently.

StashAway Malaysia Sdn Bhd country manager Wong Wai Ken said the ringgit is likely to be stable ahead of Budget 2022 which should still be focused on supporting Covid-19 affected citizens, small and medium enterprises, and retail and tourism sectors.

“The elevated expenditure should balance out the additional oil revenues as crude oil hovers around US$80 per barrel. For every US$1 rise in oil price, RM300 million is expected in additional oil-related revenue.

“Furthermore, there should be additional revenue to the government from the palm oil and rubber glove sectors as commodity prices and profits climb,” he said to TMR.

Rakuten Trade Sdn Bhd head of equity sales Vincent Lau also said in the near-term, the ringgit should trend higher from the current levels primarily due to oil prices, Malaysia’s exports performance and the reopening of the economy.

He added that the government’s commitment to discuss initiatives and measures of Budget 2022 with the Opposition would lend some strength to the ringgit.

Lau said crude oil price should remain strong with OPEC+ producers having agreed to gradually increase supply going forward.

OPEC and participating non-OPEC oil producing countries reconfirmed the production adjustment plan and the monthly production adjustment mechanism approved at the 19th ministerial meeting and the decision to adjust upward the monthly overall production by 400,000 barrel per day for the month of November 2021.