Ringgit should strengthen into year end

Fund inflows into ringgit-assets will help the local unit sustain its stronger exchange value, said currency analysts.

Oanda Corp Asia-Pacific head of trading Stephen Innes said the ringgit’s move to test the RM4.20 ( Revised to 4.10)  level against the US dollar is a significant appreciation as it represents the post-US election gap experienced in November last year, which caused Bank Negara Malaysia to intervene in the non-deliverable forward markets.

“It appears the bulls are coming out on mass supported by a decent carry, a stable to strong currency, the 1Malaysia Development Bhd (1MDB) risk being in the rear-view mirror and Malaysia’s macro fundamentals looking solid,” Innes noted.

He told The Malaysian Reserve the “carry trade” refers to investors buying higher yielding riskier assets, with the yield-to-risk reward attractive on Malaysian bonds and the ringgit.

Newsflow on 1MDB is beginning to weigh less on markets as investors have mostly priced in the issue, with foreign investors now looking past it.

“Firming oil prices of late are also supporting the ringgit’s cause, while Bank of Canada’s rate hike put the reflation trade back on the burner and this is good for commodities,” he said.

Innes has a year-end target of RM4.20 (Revised to 4.15) providing the dovish US Federal Reserve (Fed) narrative plays out, with upside resistance now at the RM4.30 level.( Revised to 4.25)

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

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