Ringgit seen stabilising further on weakening US dollar
PETALING JAYA: The ringgit may stabilise further in the coming months as the US dollar weakens, with an added boost coming from a combination of foreign fund inflows and exporters converting three quarters of their earnings back into ringgit.
Although the US dollar strengthened against the ringgit yesterday, with the currency retreating from a seven-day gain tracking losses in other regional currencies, the greenback has actually declined by 2.94% since early April to yesterday.
On a year-to-date basis, the US dollar has weakened by 4.45%.According to a report by Bloomberg, CIMB Investment Bank Bhd group head of treasury and markets Chu Kok Wei expects the ringgit to trade against the greenback at 4.10 to 4.15 by year-end despite some volatility along the way.
He said the ringgit faced the danger of getting cheaper earlier because the currency was undervalued, causing investors to cut losses, but that at current levels looks “a lot more reasonable”.
Citigroup forex analysts said a hawkish European Central Bank tends to be less disruptive for emerging-market currencies compared to a hawkish US Federal Reserve, which raised the benchmark federal funds rate by 25 basis points recently to between 1% and 1.25%.
The analysts said in a report that improving energy and industrial commodity markets also support sentiment towards emerging-market currencies for now.“However, the equity market uncertainty likely will keep investors wary of adding exposure at this time to Asia’s most equity-sensitive currencies (such as the won, Taiwanese dollar and Indian rupee).
“Instead, we continue to prefer exposure to more US-dollar, index-sensitive currencies (such as the yuan, Singapore dollar and baht) at this time,” they added.Asian stock markets were broadly down yesterday except for Indonesia’s Jakarta Composite Index, after the US equities closed lower on Tuesday dragged by large-cap technology stocks.“The heaviest foreign buying was recorded last Thursday as net purchases surged to RM208.9mil, as the fall in the crude oil price prompted investors to embark on bargain hunting in the local bourse.
“This coincided with other regional markets that experienced heavy foreign buying, notably Korea and Taiwan,” the research house said in a report.
MIDF said Sime Darby Bhd saw the highest net money inflow of RM13.44mil last week, followed by Malayan Banking Bhd and Cahya Mata Sarawak Bhd at RM10.29mil and RM4.63mil, respectively.Local institutional funds, meanwhile, sold RM249.7mil of local stocks last week after a net purchase of RM135.9mil a week earlier.
However, Maybank Investment Bank Bhd forex research head Saktiandi Supaat was more cautious on the ringgit’s outlook, saying that there would be resistance at the 4.30 and support at the 4.25 levels.“Our bias remains to lean against strength,” he said in a report.
Source: The Star