The ringgit is staging a strong rebound of 2.3% in recent days and more so with Anwar appointed as PM. The local currency strengthened past the 4.60 level, touching a high of 4.592 on Friday, Nov 11, driven by stronger-than-expected 3Q economic growth and a slight easing of the greenback after a milder expansion in the US Consumer Price Index (CPI) reading for October. Yesterday, (24 November) it hit 4.49, what a pleasant change!
The local currency also traded positively against a basket of other major currencies on Nov 14, with gains of 0.36%, 0.25% and 0.19% to 3.3405, 5.4187 and 4.7380 against the Singapore dollar, British pound and euro, respectively. It also strengthened 0.94% against 100 Japanese yen.
Source: www.marketwatch.com
As the Fed is likely to pivot sooner than previously anticipated, MIDF Research expects the ringgit to end stronger by end-2022. The decline in oil prices has limited the ringgit’s appreciation, as Brent crude oil fell 1% to US$95.99 per barrel.
The greenback also depreciated against regional currencies on 14 November, including the Thai baht (-0.27%), the Chinese yuan (-0.21%) and the Taiwan dollar (-0.67%).
However, it appreciated against the Korean won (+0.58%), the Philippines peso (+0.02%), the Indonesian rupiah (+0.16%), the Indian rupee (+0.56%), as well as the Singapore dollar (+0.31%).
The easing of China’s stringent Zero-Covid-19 policy has sparked market optimism.
• Beyond the Fed’s rate hikes, the factor which helped the ringgit rise in the past trading week had been the strengthening of the yuan following China’s support of the distressed property sector and signs of the country easing its zero-Covid rules.
• China has also rolled out some measures including the extension of repayment periods, facilitating finances for developers and lowering mortgage down-payments in support of its real estate market. The move by Beijing has helped the ringgit due to its strong correlation with the yuan.
• A stronger ringgit will help mitigate imported inflation if it is sustained.
• The ringgit may trade in a range of between RM4.40 and RM4.50 against the greenback over the next few weeks. The ringgit will see a sustained move to RM4.40 soon, and even RM4.16 over the next year if conditions continue to improve.
Hopefully, BNM will be mindful in raising OPR and assist in strengthening the ringgit to reduce imported inflation. But it is still far from RM3.80 to USD$1 under capital controls during Asian Financial Crisis. Although that (capital controls) is not something we should pursue!
References:
Ringgit regains strength days ahead of GE15 on positive macro factors, Priyatharisiny Vasu, The Edge CEO Morning Brief, November 15, 2022
Ringgit likely to retrace gains against the greenback, The Star, November 15, 2022
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