KUALA LUMPUR – The ringgit is likely to move range-bound with a downside risk next week, at between 4.1350 and 4.1470 to the United States dollar, amid potentially better oil prices and concerns about a slower economic recovery.
An analyst said the stable demand for oil in the past week may accelerate following data showing an increase in air travel, mainly from major consumers the United States and China.
“Demand and output for business operations are also seen to be moving in tandem, indicating a stabilising global oil market, which is favourable for the ringgit as it closely correlates with oil prices.”
Yesterday, the May contract for Brent crude rose almost 3.4% to trade at US$64.86 (RM268.52) per barrel.
On the other hand, the analyst said support for the ringgit may be offset by Bank Negara Malaysia’s recent report that noted the household debt-to-gross domestic product ratio rose to a new peak of 93.3% as at December 2020 from the previous record of 87.5% in June the same year.
In its Financial Stability Review for Second Half 2020 report, the central bank said there is concern that high household debt may lead to a rapid deleveraging by households in the aftermath of a crisis, dampening or derailing economic recovery.
“This likely shows that more Malaysians are not having enough disposable income or money in their pockets, and this will directly impact the expenditure for the services and retail sectors as budgets are tighter, thus the inability to spur economic growth.”
With the upward movement in oil prices, she said, there will be more pressure on consumer spending, and inflation will rise, driven by underemployment.
“With this condition, I think the overnight policy rate cannot be raised significantly, at least over the next one year, as time is needed to correct the labour market.”
Axi chief global market strategist Stephen Innes, taking into account optimism on US economic recovery and stabilising oil prices, expects the ringgit to move between 4.13 and 4.15 against the greenback.
On a Friday-to-Friday basis, the ringgit was higher versus the dollar to 4.1380/1420 from 4.1445/1485.
It also traded easier against other major currencies.
The ringgit fell against the Singapore dollar to 3.0780/0816 from 3.0778/0814 a week earlier, and weakened against the Japanese yen to 3.7455/7494 from 3.7853/7900.
It decreased marginally vis-a-vis the British pound to 5.7241/7309 from 5.7153/7224, and contracted against the euro to 4.8733/8797 from 4.8872/8927. – Bernama, April 3, 2021
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