Kuala Lumpur: The ringgit is likely to continue its uptrend this week, carving out a meaningful break below 4.05 before reclaiming that psychologically-important 4.00 level against the US dollar, said an analyst. FXTM market analyst Han Tan said investors’ risk appetite would remain influenced by the progress of the Covid-19 vaccine’s dissemination throughout major economies, as well as developments pertaining to a fresh round of US fiscal stimulus.
“Should Democrats and Republicans agree to a deal over the coming week, that could set the stage for a Santa rally and propel stock benchmarks to new record highs, bringing other risk assets along for the ride,” he told Bernama.
However, Tan said the ringgit might also be due for a breather after its stellar run over recent weeks, which could result in a slight pullback towards 4.07 versus the greenback.
He added that the upcoming Federal Open Market Committee (FOMC) policy meeting may produce more clues on the Federal Reserve’s plans to support the US economy.
“Such signals could heap more downward pressure on the US dollar while allowing for more upside for the rest of the foreign exchange universe,” said Tan.
This week, the ringgit notably reached its strongest level against the US dollar since July 2018 at 4.0483 against the US dollar on Friday while posting its seventh consecutive weekly gain.
Brent futures’ surge above the US$50 per barrel handle for the first time since March was a major boost for the ringgit, with the risk-on sentiment and waning US dollar also serving as tailwinds.
Tan said the ringgit was also able to shrug off Malaysia’s weaker-than-expected October industrial production as external factors continued to act as the primary drivers.
On Friday-to-Friday basis, the ringgit was higher against the US dollar at 4.0500/0550 against 4.0580/0620 in the previous week.
The local currency was also traded higher against other major currencies.
It appreciated against the Singapore dollar to 3.0301/0332 on Friday from 3.0461/0498 a week earlier and jumped against the British pound to 5.3537/3585 from 5.4698/4772.
The ringgit surged versus the euro to 4.9074/9122 from 4.9366/9430 and rose vis-a-vis the Japanese yen to 3.8927/8964 from 3.9023/9080 on Friday last week.
