KUALA LUMPUR (Jan 1): An improving global economic outlook and deployment of Covid-19 vaccines appeared to have nudged the ringgit to its strongest level against the US dollar in a year on the final trading day of 2020 yesterday (Thursday, Dec 31, 2020) as economic recovery bets, rock-bottom US interest rates and ongoing Federal Reserve (Fed) bond purchases dented the US dollar's appeal.
The ringgit was last traded at 4.0203 against the US dollar yesterday after appreciating to its strongest point at 4.0115.
Yesterday, the exchange rate was between 4.0115 and 4.0332. Over the last one year, the ringgit was transacted between 4.0115 and 4 .4490 versus the US dollar.
Compared to other currencies, the ringgit strengthened to 3.0426 against the Singapore dollar but weakened against the Australian dollar at 3.0993.
It was reported that the US dollar posted its biggest yearly loss since 2017 yesterday, capping off a year that saw the currency serve as a safe haven in March when concerns over the spread of Covid-19 in the US peaked before dropping on unprecedented Fed stimulus.
It was reported that the greenback soared to a three-year high of 102.99 against a basket of currencies in March before ending the year at 89.96, down 6.77% on the year and 12.65% from its March high.
It was reported that expectations of additional fiscal stimulus and rising fiscal and current account deficits are additional headwinds that are likely to hurt the US currency over the coming year.
"I expect the US dollar to depreciate further over the next few years as the Fed keeps its rates at zero while maintaining its bloated balance sheet,” Reuters reported, quoting Kevin Boscher, the chief investment officer of asset manager Ravenscroft, as telling clients. "The magnitude of the twin deficits dwarfs that of any other major economies," he said.
Looking back, Bank Negara Malaysia (BNM) said in its latest monthly highlights report that the ringgit appreciated while the FBM KLCI rose in November on an improved economic outlook amid greater clarity of the direction of US policies following the end of the US presidential election and positive developments surrounding the approval and deployment of Covid-19 vaccines.
As a result, global equity indices recorded broad-based gains, including recoveries across sectors affected by the Covid-19 pandemic, BNM said in the report published yesterday on the central bank’s website.
"Amid this background, the KLCI increased by 6.5% during the month. The improved risk appetite also led to continued non-resident inflows to the domestic bond market following yield-seeking activities by investors, which contributed to appreciation of the ringgit against the US dollar by 2.2%,” BNM said.
Yesterday, the KLCI closed down 17.2 points or 1.05% at 1,627.21.
Malaysian markets are closed today in conjunction with the New Year holiday.
“Bursa Malaysia and its subsidiaries will resume operations on Monday, Jan 4, 2021,” the bourse operator and regulator said in a statement.