Ringgit rebounds to 10-month high at 4.2080 versus US dollar

KUALA LUMPUR: The ringgit strengthened to better reflect economic fundamentals with the local note appreciating 290 basis points to a 10-month high of 4.2080 per US dollar, after the foreign exchange market resumed trading after the long extended holidays on Tuesday.
Malaysia's strong export numbers, a rebound in commodity prices, a dim outlook for US interest rate hike, healthy international reserves coupled with Bank Negara Malaysia's decision to maintain the Overnight Policy Rate (OPR) at 3.00%, bolstered sentiment for the ringgit.
Affin Hwang Investment Bank Bhd Chief Economist Alan Tan told Bernama that Malaysia recorded a strong export growth of 30.9%, year-on-year, in July, after the 10% slowdown recorded in June, while trade balance remained healthy at RM8 billion.
"International reserves remained healthy above the US$100 billion mark, as at end-August, reflecting Bank Negara Malaysia (BNM) foreign exchange measures are working, with more exporters were converting US dollar export proceeds into ringgit," he said.
BNM also maintained its Overnight Policy Rate (OPR) at 3.00%, keeping the key interest rate unchanged since July 13, 2016.
Tan said commodity prices also rebounded the last two days with palm oil prices increasing approximately 2.6% while crude oil prices experienced a sharp increase, with Brent rising about 3.48% since Sept 4.
He added that most foreign research houses also upgraded Malaysia's economic and fundamental outlook, due to the positive global trade activity and higher-than-expected gross domestic product growth in the second quarter.
On external factors, he said latest comments by US Federal Reserves members on the monetary policy led investors to reduce their expectation of a rate hike this year.
He said two of the US central bank members provided negative indication on the rate hike saying that the rate increase had caused "real harm" to the economy and job market and the Federal Reserve should "be cautious about tightening the policy further".
"The probability of a rate hike in December had reduced from 57%, in early July, to 29% today," he added.
Sunway University Business School Economics Professor Dr Yeah Kim Leng said the ringgit's uptrend was expected to continue towards the year-end on the back of improved global trade.
He said the ringgit was also expected to be supported by the country's improved economic fundamentals. – Bernama