Ringgit a star of “The Currency Show” this year?

KUALA LUMPUR: The ringgit rises vis-a-vis the US dollar for sixth consecutive day as bullish oil prices and progress in Covid-19 vaccine rollout add to optimism over the outlook of the currency, businesses and economy in general.

Bullish oil prices would be one of the principal drivers of the ringgit and the country’s fiscal position, market observers said.

At 6pm yesterday, the ringgit strengthened to 4.0280/0320 against the greenback from Monday’s close of 4.0320/0370.

Axi chief global market strategist Stephen Innes pointed that crude oil price hovered at US$60 per barrel currently, compared the government’s 2021 Budget assumption of US$42 per barrel for 2021 and US$45-US$55 per barrel for 2022-2023.

Innes said higher oil prices could also provide the government with a meaningful wiggle room to pump prime and fund some of the large infrastructure projects that have been a topic of ongoing discussion in the capital.

“Indeed, this should eventually see the ringgit trade much stronger this year. If we enter the so-called commodity supercycle, the ringgit given its strong beta to commodity prices, could be one of the stars of the currency show,” he told the New Straits Times.

Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said bullish oil prices would not only translate into better government revenue but also stronger corporate earnings for oil and gas players.

This will be good for Bursa Malaysia’s benchmark FBM KLCI index, which has reached above 1,600 points and remains above that threshold at the point of writing.

“The Covid-19 vaccine rollout will add more optimism to the currency as the business sentiment is expected to improve as vaccination progresses in the country. This will enable businesses that have been hit badly by the pandemic such as tourism and aviation to resume their operations on a larger scale and hence contribute to the nation’s economic growth,” Adam added.

Brent crude broke the US$60 marker last week, while both contracts (Brent and US oil West Texas Intermediate) have rallied more than 20 percent since the start of the year.

A decision by Opec and other major producers to slash output last spring has also provided crucial support, particularly after prices crashed into negative territory in the early days of the pandemic.

Source: NST