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)