PETALING JAYA – The ringgit was the biggest gainer among regional currencies yesterday, as investor sentiment towards Malaysia improved after crude oil prices breached US$50 (RM203.94) per barrel for the first time since November 2015. Friday morning it strengthened further.
Analysts noted that the dissipation of fear over a potential interest rate hike in the United States next month also helped buoy the ringgit, which moved in tandem with other emerging-market currencies.
At 5pm yesterday, the Malaysian currency was quoted at 4.078 against the US dollar.
(At 9.29am, Friday the local unit was quoted at 4.0740/0790 against the US dollar. )
This represented an appreciation of 0.9% against the greenback.
Year-to-date, the ringgit remained the second-best performing currency in Asia after the Japanese yen, with a total gain of 7.9% against the greenback.
â€œThe Malaysian currency is certainly benefiting from the oil rally,â€ AmBank Group foreign exchange strategist Wong Chee Seng said.
â€œIn addition, it appears that the market is no longer fearful of the risk of an interest rate hike by the US Federal Reserve (Fed) next month,â€ he told StarBiz over the phone. yesterday.
Generally, an interest rate hike in the US will have a negative impact on emerging-market currencies, including the ringgit.
The Federal Open Market Committee (FOMC) will meet next month to decide on the US rate direction.
The Fedâ€™s policymakers have thus far signaled that a rate hike of at least 25 basis points could be in the cards based on the release of the FOMCâ€™s April meetingâ€™s minutes last week.
Meanwhile, international oil benchmark Brent extended its gains for the third consecutive day, with the contract for July settlement rallying to an intra-day high of US$50.26 per barrel as of 3pm yesterday.
This was the first time in more than six months for Brent to trade above US$50 a barrel, thanks to lower US crude stockpiles, which could help trim the ongoing supply glut.
According to a report from the Energy Information Administration last week, US crude inventories fell 4.23 million barrels, more than twice what was projected by analysts surveyed by Bloomberg, while US crude production dropped for an 11th week to 8.77 million barrels a day, the lowest level since September 2014.
â€œThe correlation between oil and the ringgit remains significant,â€ Christopher Wong, a foreign-exchange strategist at Malayan Banking Bhd in Singapore, was quoted as saying by Bloomberg.
He noted that the oil-price gains had contributed to the ringgitâ€™s strength, which was also supported by a mild retreat in the US dollar and supportive risk sentiment.
Improvements in crude oil prices have a positive impact on investor sentiment towards Malaysia, which is perceived as an oil and gas (O&G)-driven economy.
For one thing, it will help alleviate concerns over the budget position of the Malaysian Government, whereby O&G-related sources are expected to account for about 21% of its revenue this year.
For another, it will help generate more economic activities in the country and boost growth.
Friday morning ringgit strengthens more
KUALA LUMPUR: The ringgit strengthened against the US dollar early Friday, riding on the optimism over a continuous improvement in oil prices, dealers said.
At 9.29am, the local unit was quoted at 4.0740/0790 against the US dollar from 4.0780/0850 at 5pm on Thursday.
The ringgit also traded mostly higher against other major currencies.
It eased against the Singapore dollar to 2.9638/9678 from Thursday’s close of 2.9600/9659 but strengthened against the yen to 3.7057/7119 from 3.7093/7167 yesterday.
The local unit rose against the British pound to 5.9778/9872 from 5.9890/9021 previously but weakened against the euro to 4.5584/5644 from 4.5576/5670. – Bernama