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US dollar’s weak bias, oil prices to support ringgit

29 Nov 2020 / 22:39 H.

PETALING JAYA: The ringgit could rediscover pre-Covid-19 pandemic levels going forward, as the US dollar’s overall weak bias creates a conducive environment and oil prices provide further support for the Malaysian currency, according to FXTM market analyst Han Tan.

He noted that the exchange rate between the ringgit and the dollar is now primed to launch another attempt at breaking below the 4.05 support level, having been rejected before in January 2020, and in March 2019.

“The first Friday of December will feature the release of the November US non-farm payrolls data. Markets are expecting an increase of 500,000 jobs added for the period, which would be the lowest figure since the pandemic. Further signs of a slowing pace in the US jobs market’s recovery would underscore the need for fresh fiscal stimulus.

“However, once the transition in the US administration gets underway in January, barring any further political impasses, that should offer a bigger boost to the reflation trade. Ultimately, developments surrounding the Covid-19 vaccine are expected to dominate market sentiment, with risk assets set to react according to the shifting tides in the global economic outlook,” he said.

The ringgit was Asia’s second best performer behind the South Korean won last week, as regional currencies continued to take advantage of the weaker US dollar.

Last Thursday’s Budget 2021 vote propelled the ringgit to its strongest level since January, erasing all of its year-to-date losses incurred since the height of the pandemic.

The ringgit’s gains were helped along by the increase in oil prices as well as the risk-on sentiment stemming from positive news surrounding the development of Covid-19 vaccines. The positive surprise in Malaysia’s October exports figures released Friday also aided the ringgit’s return below the 4.07 mark.

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