KUALA LUMPUR – The ringgit climbed 140 basis points (bps) to close firmer against the US dollar today, propelled by a crude oil price rally and softer greenback dragged by the retreat in benchmark 10-year US Treasury yields.
At 6pm, the ringgit traded at 4.0410/0460 versus the US dollar from 4.0550/0600 at yesterday’s close.
Axi chief global market strategist Stephen Innes said the ringgit’s recovery was very much commodity-driven, especially through the crude oil price channel which always benefited the local note.
“As crazy as it sounds, crude oil prices traded higher than the pre-pandemic levels due to the reflation trade on the back of US stimulus effects,” he told Bernama.
Meanwhile, Singapore-based OCBC Bank’s forex strategist, Terence Wu, said with the stalling of the up-move in the longer-dated US Treasury yields, the market took the opportunity to revert to a sell-US dollar-on-rally stance.
“This contributed to the broad-based retreat in US dollar-Asian currencies, including against the ringgit,” he said.
At the time of writing, benchmark Brent crude edged up 0.09% from its previous session to US$56.63 per barrel while the 10-year US Treasury yields slipped more than six basis points from a 10-month high yesterday, snapping the greenback’s three-day winning streak.
On market sentiment over the two-week movement control order (MCO) that began today, Innes said the tighter restrictions would merely be seen as a speed bump at this stage, as vaccine optimism recovery would outweigh the short-term risk of the lockdowns.
Meanwhile, Wu believes the market would eventually digest the uncertainties relating to domestic developments, although this would still take some time.
“Nevertheless, we are not expecting to see outsized ringgit weakness relative to its Asian peers due to this domestic driver for now,” he told Bernama.
In a note earlier today, Kenanga Research expected the local note to linger around the 4.05-4.10 range against the US dollar in the immediate term following the enforcement of the MCO and the declaration of a nationwide state of emergency.
“Nevertheless, we still maintain our US dollar-ringgit year-end forecast of 3.95 on the back of effective vaccine rollouts, higher Brent crude oil price and broad US dollar weakness,” it said.
At the close, the ringgit also traded higher against other major currencies, except against the pound.
The local unit appreciated against the Singapore dollar to 3.0498/0543 from 3.0535/0575 and strengthened against the yen to 3.8912/8964 from 3.8927/89784 yesterday.
Vis-à-vis the euro, the ringgit rose to 4.9252/9325 from 4.9313/9378 yesterday while against the pound, it slipped to 5.5313/5398 from 5.5156/5236 previously. – Bernama, January 13, 2021
