KUALA LUMPUR (April 20): The ringgit is expected to move between 3.80 and 4.00 against the the US dollar in the second quarter (Q2) of this year, helped among others by reduced worries of a hike in US interest rate, says ForexTime Ltd (FXTM) chief market analyst Jameel Ahmad.

The positive outlook for the local currency is also due to recovery in commodity prices and reduced risk from China.   

“I think that the ringgit is moving onto the next stage of its psychological recovery of losses against the US dollar,” Jameel told a media conference.

He said three factors — demand for the US dollar, poor sentiment towards commodities such as oil, and China’s slowdown — had led to the depreciation of ringgit last year, but those sentiments have been reversed and work in favour for the ringgit this year.

Elaborating on the demand for the US dollar, Jameel said the greenback’s weakness had helped to contribute to its attractiveness in the emerging markets.

“As such, the ringgit is benefitting as are other currencies, such as Indian rupee and Indonesian rupiah. The reversal of US interest rate expectations is one of the reasons for the US dollar’s weakness,” he said.

The price of West Texas Intermediate (WTI) oil is set to range between USD35 and USD42 to USD44 during the upcoming quarter, according to FXTM.

Noting that the rebound in commodity prices has largely been technical, Jameel said he expects the price of West Texas Intermediate (WTI) oil to be between US$35 and US$44 during the second quarter.

“The US$35 mark, which was once the psychological resistance, has now become the psychological support for the oil price. With oil above US$35, it is difficult to see ringgit moving back above RM4,” he added.   

As for China’s slowdown, Jameel said China anxieties will cool down in Q2 with a rebound in the exports in China, and with the People’s Bank of China publicly declaring its intention for renminbi’s stability.

This is a positive sentiment for emerging markets as a whole, including Malaysia, he said.

However, Jameel pointed out that emerging markets are likely to enter a period of weaker growth, and the return of potential “risk-off” attitude could also limit the momentum driving ringgit.

The analyst said the volatility in the ringgit is a little too high, making it impossible to provide an outlook for the currency beyond Q2.

On the ringgit’s outlook against currencies other than the US dollar, Jameel said the outlook against the British pound is very positive, with potential for further gains.

“The euro looks set for further correction higher, therefore the ringgit might drift lower against Euro.  

“Similarly, ringgit might weaken against the Australian dollar and New Zealand dollar, as both (these currencies) appear set to recover further losses. As for the Singapore dollar, it is expected to remain relatively stable against the ringgit” he added.

Jameel also mentioned that the recent rebound in momentum for the ringgit has helped eased the pressure on Bank Negara to move interest rates higher, with the recent rebound in the currency also leading to a lower inflation reading, as 2016 continues.

As of 3.47pm, the ringgit strengthened slightly against the US dollar, trading at RM3.878.