Friday 29 Mar 2024
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KUALA LUMPUR (April 24): The ringgit is expected to continue trading sideways against the US dollar for the rest of the second quarter (2Q) this year after much of last week's selloff momentum has appeared to have faded, said online broker ForexTime (FXTM).

FXTM market analyst Han Tan said during 1Q 2019, the ringgit strengthened against the US dollar even as the local currency was exposed to external factors such as the resilient greenback, the US-China trade tensions and the anticipated slowdown in the Chinese economy.

"Then mid-April, headlines around the prospects of Malaysia being dropped from the FTSE World Government Bond Index and from the Norwegian sovereign wealth fund's holdings promoted further outflows that contributed to the ringgit unwinding its gains against the US dollar from the three months prior," he told a news conference today.

As at the time of writing, the ringgit was trading 0.13% higher against the US dollar at 4.13.

"However, as much of last week's selloff momentum appears to have faded, we expect USD/MYR to trade within the 4.10-4.15 range for the rest of 2Q, barring any major catalysts for movements either way," Tan said.

Still, Tan said it is no cause for alarm.

"Why? If you look back at November last year we were at 4.20 to the US dollar. Back in January 2017, we were at 4.50. Despite various global and local factors, the Malaysian economy remained resilient, it didn't crumble," he said.

That said, Tan is of the view that the outlook for Malaysia economic growth will be "respectable", with "manageable inflation and robust domestic consumption" — all of which should provide a strong base for the ringgit throughout 2019.

On inflation, Tan said a record of deflation (for January and February) does not necessarily carry typical implications of recessionary pressure. He said inflation, which is measured by the Consumer Price Index, should better reflect price pressure by 4Q 2019 when the index base readjusts.

Earlier today, data from the Department of Statistics Malaysia showed Malaysia's inflation rate for March grew 0.2% to 121.1 compared with 120.9 in March 2018.

Tan also expects further upside on Brent crude oil's performance as global oil supply tightens. It is currently trading at US$74.15 per barrel.

"So if oil continues to trade above US$70 per barrel, then we could see that translate into stronger correlation between oil and the ringgit. Personally, I do see it trending towards US$80 as we enter into the second half of the year," he said.

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