KUALA LUMPUR: Ringgit’s performance over this week (December 10) will be dependent on any new potential news-flow over the trade truce between the US and China, said FXTM currency strategy and market research global head Jameel Ahmad.
He said the local currency had previously benefited in a similar way to global emerging markets on the development of a trade truce, however comments made later from US President Donald Trump on his Twitter feed has encouraged investors to doubt the conviction over the country’s commitment to this agreement.
“If financial markets panic that the 90-day truce could be broken from either side, this would present the potential for a very sudden downturn of risk appetite, which still presents the potential to encourage the Ringgit to fall all the way towards 4.20 before year-end,” he said.
He said financial investors do however remain hopeful that a long-standing issue to the prolonged trade tensions between the US and China will eventually be found.
“This as we saw earlier in the week would be extremely encouraging news for risk appetite, and would lead to a buying flurry of demand for emerging market currencies like the Malaysian Ringgit,” he said.
He said if the positive scenario unfolds, this can lead to the ringgit advancing all the way to at least 4.10 USD-MYR.
The ringgit had been trading higher against the greenback last week between 4.11465 and 4.1670, after US Trump and his Chinese counterpart, Xi Jinping, agreed to pause the trade war. During the week ended November 30, ringgit hits 4.2010. Week on week, the ringgit closed higher on Friday at 4.1670 as compared to 4.1842 the same day a week earlier.
Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the recent USD-MYR rally is still tentative as the 90-days “ceasefire” would certainly help ease the trade tension between the US and China while at the same time, allowing both countries to have common grounds to further discuss the amicable solution.
Besides that, he said the ringgit’s performance is also dependable on uncertainty on oil supply cut which has yet to materealise during The Organisation of the Petroleum Exporting Countries (OPEC) meeting on Thursday.
At this juncture, he said the current resistance and support level stands at 4.2020 and 4.1197 respectively, and technical indicators suggests that USD-MYR remained near to the oversold position.
“There could be room for appreciation but it is quite limited in view of the risk aversion,” he said.
FXTM research analyst Lukman Otunuga said although OPEC tentatively agreed to cut oil output, the cartel's failure to decide on exactly how much crude will be taken off the markets sent crude prices tumbling more than three percent.
“If OPEC ends up disappointing markets by cutting production less than expected, oil prices will most likely be exposed to downside shocks. However, oil bulls are seen making a swift return if the cartel is able to cut production by roughly 1.3 million to 1.5 million barrels per day,” he said.