Friday 29 Mar 2024
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KUALA LUMPUR (Feb 10): The ringgit strengthened sharply today against major currencies including the US dollar, euro and Singapore dollar as crude oil prices continued to rise on lower inventory and as global Covid-19 vaccination programmes led to expectation of higher fuel demand. The ringgit had also tracked a firmer yuan.

Compared to the US dollar, the ringgit strengthened 0.16% to 4.0402 at the time of writing.

The exchange rate so far today was between 4.0390 and 4.0680, and over the last one year, the ringgit was transacted between 3.9957 and 4.4490 against the US dollar.

In theory, higher crude oil prices bode well for the ringgit as the commodity forms a crucial component of the Malaysian economy.

The ringgit also tracks the yuan as China and Malaysia are rival exporting nations.

In theory, while currencies of rival exporting nations move in tandem due to competitive devaluation, they have also been observed to appreciate in tandem with each other.

At the time of writing today, the yuan was traded against the US dollar at 6.4381. Over the last one year, the yuan had strengthened to current levels from the firmest point at 7.1777.

Axi chief global market strategist Stephen Innes told theedgemarkets.com today that the ringgit is expected to "strengthen to 3.9500 against the US dollar in the first quarter of 2021 before appreciating further to 3.6500”.

Innes wrote in a note today that the ringgit traded well overnight in line with other petrol dollar peer currencies and got a "double whammy boost" from the stronger yuan on robust credit demand expectations in China for January 2021.

"Higher oil prices are also a boon for Malaysian fiscal position [at] US$60/bbl; this compares with government's 2021 budget assumption of US$42/bbl for 2021, US$45-US$55 for 2021-2022. 

"It could also provide the government with a meaningful wiggle room to pump prime and fund some of the large infrastructure projects that have been a topic of ongoing discussion in Kuala Lumpur. 

"Indeed, this should eventually see the ringgit trade much stronger this year,” he said.

Against other currencies today, the ringgit strengthened 0.07% to 3.0475 against the Singapore dollar at the time of writing and compared to the euro, the ringgit appreciated 0.01% to 4.9002 as crude oil prices rose.

It was reported that oil prices rose again on Wednesday, extending their more than week-long rally after industry data showing a fall in US crude oil stocks added to optimism about an expected rise in global fuel demand.

It was reported that Brent crude was up by 11 cents, or 0.2%, to US$61.20 by 0110 GMT after rising nearly 1% on Tuesday, when it touched a 13-month high, while US crude added two cents to US$58.28.

"Crude inventories fell by 3.5 million barrels in the week to Feb 5 to about 474.1 million barrels, data from the American Petroleum Institute showed on Tuesday.

"Oil prices have rallied since November as governments kicked off vaccination drives for Covid-19, while putting in place large stimulus packages to boost economic activity," Reuters reported.

Edited ByChong Jin Hun
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