Ringgit could extend gains on a dovish Fed

 

The ringgit — buoyed by stronger bond and equity yields in the country — is likely to trade at RM4.25 against the greenback due to heightened regional risk, said analysts.

Oanda Corp head of trading for Asia Pacific Stephen Innes said the weak US dollar performance has led to a wave of yield appeal throughout the region, with investors buying ringgit-denominated bonds and undervalued equities.

“It has been a consistent theme on the back of tepid US inflation data, which has seen a fair bit of regional inflow with the ringgit benefitting,” Innes told The Malaysian Reserve (TMR).

For the first-half of the calendar year (1H17), Malaysia issued RM51.6 billion worth of bonds — represent- ing a 45% increase from the same period last year.

Global funds have also started to return to the Malaysian bond space this year, buying RM15 billion during April and May, versus RM59 billion sell-offs recorded for five straight months up to March, said Innes.

Meanwhile, the ringgit performed 0.06% higher against the greenback at RM4.2875 as at 2.45pm yesterday.

Since the start of 2H17, the Malaysian currency has been relatively stable up to August, ranging from a high of RM4.3008 to a low of RM4.2580.

Innes said Bank Negara Malaysia’s (BNM) move to liberalise its currency policy has resulted in the stability of the ringgit.

“Malaysia’s macro prospects look appealing and currency stability via the central bank’s policy is working,” Innes said.

“While some concerns remain over domestic liquidity, BNM’s more liberalised currency policy has investors cheering,” he added.

The Malaysian Reserve

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Senior Currency Trader and Analyst at OANDA
Stephen has over 25 years of experience in the financial markets and specializes in Asian currencies at OANDA. After having started his trading career with NatWest Bank, he is currently based in Singapore as a Senior Currency Trader and Analyst with OANDA, focusing on the movement of the Aussie Dollar and ASEAN Currencies. Stephen has an extensive trading experience in Interest Rate Futures, Money Markets and Precious Metals. Prior to joining OANDA, he worked with organizations like Cambridge Mercantile, Nat West, Garvin Guy Butler, Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes
Stephen Innes

Latest posts by Stephen Innes (see all)