Ringgit at 36-week high due to OPR hike expectation


Malaysia-Ringgit-300x194KUALA LUMPUR: The ringgit, which is currently hovering at 3.17 to the US dollar, its highest in 36 weeks since November 2013, is expected to take a cue from the outcome of the Bank Negara Malaysia’s Monetary Policy Committee (MPC) meeting tomorrow.

“The ringgit could potentially strengthen to 3.15 per US dollar in the near term, if the central bank raises interest rates in July’s policy meeting,” said RHB Research House in a note.

Expectations of strong export growth domestically and a possible increase in the Overnight Policy Rate (OPR) were the supportive factors for the ringgit in more than a week.

Demand for the ringgit improved as a result of increased risk appetite, especially after the unit broke the 3.20 level.

Coupled with foreign exchange reserves which picked up by US$1 billion in June to US$131.9 billion (after dropping by US$0.3 billion in May), the ringgit rose to its best level in nine months, appreciating 3.36% year-to-date.

The ringgit went on a rally against the US dollar from the 3.22 level beginning June 26, as expectations mount that the OPR will be increased.

Many analysts anticipate Bank Negara to raise the OPR by 25 basis points (bps) to 3.25%.

AllianceDBS Research House said the 25 bps hike should be manageable and not affect borrowers’ ability to service higher interest costs.

“The strong ringgit’s performance this week mirrors increased bets on an OPR hike as early as the upcoming BNM MPC,” said Hong Leong Bank Research.

“Bets on BNM to raise the OPR tomorrow were driving recent bids in ringgit.

Tomorrow’s MPC meeting would be crucial as the market is split on the OPR outcome,” a local currency trader told Bernama.

The ringgit was firm amid prevailing OPR hike expectations in the run-up to the announcement, but was observed less aggressive this week given that the US dollar overseas has also turned firmer.

Another currency trader warned that the ringgit could see a turnaround should there be no increase tomorrow. “Chart-wise, some technical tools started pointing to an imminent bullish reversal,” he said.

The ringgit could weaken back and hover at around the 3.20-3.25 level in the near term, and could weaken back to 3.25-3.30 when expectations of a rate hike in the US build-up, said an analyst at RHB Research. – Bernama

I will connect with you soon

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Powered by WordPress.com.

Up ↑

%d bloggers like this: