Friday 29 Mar 2024
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KUALA LUMPUR (Feb 8): The steady climb on crude oil prices is expected to lend support to the ringgit should the upward momentum on fuel prices gather steam.

OCBC Bank forex strategist Terence Wu told The Edge that the US dollar has been resilient of late, and that exerts downward pressure on the ringgit against the greenback.

However, Wu pointed out that there have been a number of mitigating factors in favour of Asian currencies, for instance, the rising crude oil prices which are supportive of the ringgit.

He expects the ringgit to fluctuate in the range between 4.0300 and 4.0800 against the greenback. On a longer-term horizon, he forecasts the ringgit to show appreciation bias against the US dollar, targeting  below 4.00 levels at the end of 2021.

According to Bloomberg, at the time of writing, the Brent Crude oil price rose 1.23% to US$60.07 per barrel — the highest level since pre-Covid 19 in January last year. The oil price has been on the rise since October 30 last year when it was at US$37.46.

Meanwhile, the ringgit rose 0.09% to 4.0660 against the US dollar today. Year to date, the ringgit has depreciated 1.5% against the greenback. However, since March 23 last year, the local currency has appreciated 8.5% against the US dollar from the 4.447-level.

Phillip Capital Management Sdn Bhd chief strategist Phua Lee Kerk told The Edge that it is still unknown whether the strong energy price is sustainable.

He is of the view that the US dollar will continue to strengthen in the coming one or two months. “If the weakening US dollar is the reason for the current stronger crude oil price, ultimately, the oil prices will weaken too. The ringgit strength will also start to lose momentum,” he said.

“It is still early to make a call that the ringgit will be strengthening, as the US dollar may start to strengthen when the US economy recovers,” Phua added.

He opined that how the Malaysian Government contains Covid-19 infections, and how fast the economy can recover from the pandemic will be among the key factors that dictate the direction of the ringgit.

Nonetheless, Phua maintains his target price for ringgit against the US dollar at 3.87, underpinned by the weakening US dollar this year.

Axi chief global market strategist Stephen Innes said in a note today that Malaysia is experiencing the worst Covid-19 outbreak in Asia, and the renewed MCO is likely to hit services growth in the short-term and is weighing on the ringgit.

“Still, the continued ascent of oil prices provides an essential reassurance source for the Malaysian market and the ringgit.

“Strong exports and a stronger renminbi could see the ringgit trade with a favourable bias, but any renewed push higher in US yields could dampen sentiment,” he added.

Edited ByKathy Fong
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