KUALA LUMPUR (Feb 15): The ringgit opened firmer against the US dollar today amid surging oil prices.
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At 9.07am, the local currency had risen to 4.0400/0450 against the US dollar from last Thursday’s close of 4.0405/0445.
Axi chief global market strategist Stephen Innes said in addition, negative US real yields, dovish Federal Reserve (Fed) remarks and a still improving economic backdrop with sectors of the local economy emerging from the movement control order (MCO) should keep the ringgit in good stead even though Asia’s forex interest remains low over Chinese New Year.
“The weaker Malaysia’s gross domestic product (GDP) print for 2020 was very much expected but the market continues to look through past data while anticipating a bigger boost in the first and second quarters as the economy reopens from the MCO.
“Higher oil prices are also a boon for Malaysia’s fiscal position at US$60 per barrel compares with government’s 2021 budget assumption of US$45-55 for 2021.
“It could also provide the government with a meaningful wiggle room to pump prime and fund some of the large infrastructure projects that have been a topic of ongoing discussions in Kuala Lumpur. Indeed, this should eventually see the ringgit trade much stronger this year,” he told Bernama.
Malaysia’s GDP contracted by 5.6% in 2020, dropping by 3.4% in the fourth quarter.
“However, the US dollar is holding an even keep so far due to improving growth differentials as the vaccine programme is working very well and the Covid-19 case curve in the country is falling, this is also slowing flows into Asia on a bit of a greenback.
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“The longer-term view for the ringgit may also be a bit clouded by uncertainty over the US-China trade policy but the market doesn’t think things will get worse and would not improve quickly,” he added.
At press time, the Brent and the West Texas Intermediate (WTI) stood higher at US$63.32 and US$60.58 per barrels, respectively. The US Energy Information Administration (EIA) had recently lifted its 2021 and 2022 estimates for the WTI and Brent crude oil prices.
It lifted 2021 and 2022’s WTI oil price forecasts to US$50.21 a barrel and U$51.56 per barrel, respectively. The EIA also raised its Brent crude price projections to U$53.20 for 2021 and to U$55.19 for 2022.
The domestic market was closed last Friday for the Chinese New Year holiday.
The local currency was traded mostly higher against other major currencies today.
The ringgit appreciated against the yen to 3.8447/8505 from 3.8602/8644 at last Thursday’s close and rose vis-a-vis the euro to 4.8965/9038 from 4.9003/9068 previously.
It was higher against the against the Singapore dollar at 3.0491/0540 from 3.0499/0531 but lower against the British pound to 5.6051/6124 from 5.5896/5964 previously.- The Edge Market