by ALIFAH ZAINUDDIN/ FILE PIX
THE rally in the ringgit suffered a minor setback yesterday as uncertainties around a tax shake-up in the US saw investors adopting a “wait-and- see” mode.
The local unit slumped to RM4.075 against the dollar yesterday, a 0.22% drop, after opening at RM4.0645 as the dollar firmed on optimism surrounding the tax legislation.
Australia and New Zealand Banking Group Ltd head of research Khoon Goh believe the momentum could well extend in the near term to push the local unit towards the RM4 mark against the US dollar.
He said the ringgit’s gains appear to be “overextended” and a retracement could occur against the greenback, but a stronger global growth outlook and higher oil price will provide an offset for a firmer ringgit.
Oanda Corp head of trading for Asia Pacific Stephen Innes added that the ringgit rally could run deeper if the economic and monetary policy stars align.
“While upcoming elections could cause a hiccup, a stronger currency would be a definite signpost that the economy is doing exceptionally well, so we
could see the government lending support to the stronger ringgit narrative for an election campaign bounce,” Innes said.
The greenback’s gains could be short-lived amid growing concerns of a possible US government shutdown with its federal budget deadline looming.