External factors expected to continue to weigh on ringgit next week

External factors expected to continue to weigh on ringgit next week
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KUALA LUMPUR (Nov 13): External concerns are expected to play a role in determining the direction of the ringgit next week, with investors keeping a close eye on US retail sales, said an economist.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said should the US data continue on a positive trend, the ringgit would remain soft next week.

He said the latest gross domestic product (GDP) figures suggest that the economy was badly affected by the movement control order during the third quarter of this year (3Q21).

On Friday (Nov 12), Bank Negara Malaysia (BNM) announced that Malaysia’s economy contracted by 4.5% in 3Q21 as opposed to the 16.1% growth recorded in 2Q21.

This was attributed to the reimposition of the nationwide containment measures during the period, in line with economists’ expectations.

In 3Q20, GDP growth was at -2.7%, BNM said.

However, Mohd Afzanizam said the situation could improve in the final quarter following the lifting of the interstate travel ban, which will propel economic activities.

“In that sense, it could be positive for the ringgit. But for now, the inflation scare is the overarching factor that would result in the US dollar-to-ringgit remaining in a tight range.

“The local note could be lingering around 4.16 against the US dollar next week,” he told Bernama.

Meanwhile, BNM governor Datuk Nor Shamsiah Mohd Yunus said the ringgit appreciated by 0.9% against the US dollar as of Nov 9 (since Oct 1), broadly in line with the trend of other regional currencies.

She said the local note was further supported by an improved domestic outlook amid the economic reopening and higher commodity prices.

“Going forward, as uncertainties regarding global liquidity adjustments and developments surrounding the path of the pandemic remain, financial and foreign exchange markets are expected to be subject to periodic bouts of volatility,” she said.

On a weekly basis, the local note was firmer versus the greenback at 4.1645/1665 from 4.1690/1720 at Friday’s close.

The local unit was traded mostly higher against other major currencies compared to the previous Friday.

The ringgit fell against the Singapore dollar to 3.0757/0776 from 3.0729/0746 a week earlier.

Meanwhile, it improved against the euro to 4.7646/7669 from 4.7997/8020 previously, appreciated against the Japanese yen to 3.6521/6542 from 3.6536/6553 a week before, and rose vis-a-vis the British pound to 5.5783/5810 from 5.5865/5892.