By Nurunnasihah Ahmad Rashid
KUALA LUMPUR, Nov 21 -- The ringgit is expected to continue its upward momentum against the US dollar next week as investors await for new catalysts following the positive COVID-19 vaccine development and oil price improvement, said an analyst.
Axi chief global market strategist Stephen Innes said the ringgit had been in a range-bound session throughout this week as risk sentiment had been tamed by the global surge in COVID 19 cases.
“The US has been hit particularly hard and the anticipated economic hit over the short term has dented emerging market sentiment.
“But the market will be closely waiting for the Organisation of the Petroleum Exporting Countries (OPEC) meeting which should lead to an extension of the current level of oil production cuts that will be viewed favourable for oil and the ringgit since Malaysia has a significant oil export quotient.
“With that being said I'm not expecting too much on the way of breaching current ranges unless there is a surprise US stimulus deal,” he told Bernama.
Hence, Innes expects the ringgit to trade between 4.0750 and 4.1050 as he foresees oil prices to trade higher next week on expectations of an oil supportive outcome from the OPEC meeting.
Meanwhile, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said at the moment, the risk-on mode is quite prevalent primarily driven by the vaccine news.
“At the same time, the new cases have been rising while economic data points have been quite decent.
“The US dollar has been on the declining as a result, leading to the appreciation of the emerging market currencies, including the ringgit,” he said.
Pfizer and Biontech as well as Moderna are the front runners in respect to the vaccine development and it is expected to receive approval from the US Food and Drug Administration (FDA) very soon.
“If that happens, the economy should be able to operate normally once the vaccine has been procured.
“So, that’s the main narrative. However, the devil lies in the detail. So, the market will be closely watched on this space in order to form their opinion and strategy,” he added.
Mohd Afzanizam said as for now, the ringgit should stay positive in the immediate term.
On a Friday-to-Friday basis, the ringgit improved against the US dollar to 4.0900/0940 from 4.1220/1260 in the previous week.
However, the local currency traded mixed against other major currencies.
It rose against the Singapore dollar to 3.0434/0479 from 3.0624/0668 last Friday and surged versus the euro to 4.8495/8559 from 4.8923/8995 previously.
However, the ringgit fell vis-a-vis the yen to 3.9399/9445 from 3.9918/9978 and weakened against the British pound to 5.4295/4360 from 5.4231/4313 a week earlier.