Ringgit strengthens against US$
By ROYCE TAN
PETALING JAYA: The start of the year saw the ringgit rebounding to levels not seen since 2018 on the back of the Brent crude oil price uptrend and Malaysia’s strong commodity performance.
The ringgit rebounded over the greenback yesterday, which saw it breach the RM4 mark for the first time since June 2018 when it rose to RM3.993 at 10.15am.
The last time the ringgit was quoted below RM4 to the dollar was on June 18,2018 at RM3.9978.
The dollar index also slipped to its lowest level since 2018 yesterday, after it fell 0.55% to 89.43.
The index measures the value of the greenback against a basket of six other currencies.
Other than the weakness of the US dollar, Alliance Bank chief economist Manokaran Mottain (pic below) said the Brent crude oil price was another factor, as the uptrend is directly proportional to the ringgit.
“Our primary commodities are also doing well, such as the crude palm oil, which is why the ringgit is appreciating.
“Having said that, we must be mindful of the long term trend, which I think will still be about RM3.95 to RM4.05 to the dollar, ” he told StarBiz.
Manokaran said this was due to the weak expectations of Malaysia’s gross domestic product (GDP) performance for the fourth quarter of 2020, which is expected to come in between the second quarter and third quarter figures.
The third wave of Covid-19 during the quarter had dampened expectations of a positive growth with stricter movement control measures implemented after an earlier relaxation.The GDP is expected to contract further than the -2.7% recorded in the third quarter, but not as severe as the -17.1% recorded in the second quarter when the full blown movement control order (MCO) was in place.
Manokaran added that downside risks to the ringgit will be renewed lockdown measures, the spread of the new Covid-19 strain and the persistent closure of national borders.
“Despite all these, 2021 I think will still be a year of positive growth. That can come in the later part of the year, ” he said.
Kenanga, in its ringgit weekly outlook, said a key driver of the ringgit’s strength has been the rise of the Brent crude oil price, mainly due to optimism as the race to vaccinate against Covid-19 has begun globally.
It said the currency reached its peak for the year on the final day of 2020, up by 1.7% on Dec 31 to RM4.02 against the dollar, its strongest since June 2018.
“The ringgit is seen to strengthen further in the first week of 2021 as the dollar is expected to extend its broad-based weakness on the back of positive global economic sentiment, strong crude oil prices and the global Covid-19 vaccination roll out.
“On the contrary, our five-day exponential moving average (EMA) indicator suggests that the ringgit might reverse its steady appreciation and depreciate against the US dollar by 0.3% to 4.032 this week.
“Technical-wise, the USD/MYR pair may move towards the first resistance at 4.039 and test the second resistance at 4.058, which indicates an upside pattern for the greenback,
” the research house said, adding that a rally towards a support level of 4.011 will reaffirm the ringgit’s strength.
The ringgit closed at RM4.0055 yesterday. Brent crude oil traded at US$52.59 per barrel as at press time, an increase of 1.53%.
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