Fast & furious ringgit needs to take pit stop, State Street says

-A +A

SINGAPORE (Dec 7): After going from last to first in Asia, the Malaysian ringgit may be headed for a break — before resuming its rally.

Momentum indicators, including slow stochastics, show the ringgit is overbought. The currency has surged 3.6% against the US  dollar in the past month, the best performer as oil prices climbed and the central bank signalled a potential interest-rate increase. It was the worst-ranked emerging Asian currency in the same four-week period last year, as a crackdown on speculators and expectations of a stronger greenback spurred outflows.

“There’s potentially a bit more room to go, but if you look at the chart, perhaps it may need a bit of consolidation at some point,” said Ng Kheng Siang, Asia Pacific head of fixed income at State Street Global Advisors in Singapore, which oversees US$2.7 trillion. “It’s a catch-up play. Last year there were quite a number of issues affecting Malaysia.”

The ringgit has dropped for three straight days after surging to a 15-month high on Monday. Overseas investors bought almost US$2 billion of Malaysia’s sovereign debt in September, the biggest inflow in four months.

“If you have some new money you may want to re-position in areas that haven’t done well but don’t look that bad,” Ng said. “That’s why we’ve seen a late surge in Malaysian assets.”