Oil price rally may boost ringgit against US dollar next year

As Malaysia is a net exporter of crude oil and petroleum products, the price movements exert a significant influence on the strength of the ringgit versus the US dollar.

KUALA LUMPUR: The current rally in crude oil prices could provide a fillip to the ringgit against the US dollar next week, said an analyst.

According to reports, oil prices were in an upward trend for the first time since April, as demand recovery supports the effort to reduce supply.

The analyst said reports on the easing of lockdowns in Europe, some parts of Asia, and even Africa have boosted the demand as businesses were opening up.

Besides, the Organisation of the Petroleum Exporting Countries and allies (Opec+) have expressed confidence that all members would comply with their agreed output cuts, against the backdrop of demand concerns over new coronavirus cases in China and elsewhere.

As Malaysia is a net exporter of crude oil and petroleum products, the crude oil price movements exert a significant influence on the strength of the ringgit.

On the contrary, FXTM market analyst Han Tan said the US dollar-ringgit movement could be limited to a tight range next week, barring any significant swing in global risk sentiment.

“Should the US dollar continue paring losses seen in the first half of June, that may guide US dollar-ringgit closer towards the 4.30 psychological level.

“However, a meaningful bout of risk-on mood in global markets could see the ringgit strengthen below the 4.25 level against the greenback,” he told Bernama.

Meanwhile, in a note, AmBank Research expected the ringgit to trade between its support level of 4.2504 and 4.2622 while its resistance is pinned at 4.2902 and 4.3030.

Throughout the week, the ringgit was traded mixed against the greenback, with an average exchange rate of 4.2753 during the week.

Among the reasons were concerns of a resurgence of the Covid-19 pandemic, Malaysia’s unemployment rate, firmer oil prices, and the government’s decision to allow expatriates to enter the country.

Malaysia is currently in the recovery phase of the movement control order (RMCO), which will last until Aug 31.

On a weekly basis, the ringgit ended slightly lower at 4.2670/2700 against the US dollar from 4.2650/2700 recorded last Friday.

The local currency improved against the Singapore dollar to 3.0614/0662 from 3.0706/0753, but declined to 3.9897/9964 from 3.9663/9717 when compared with the Japanese yen a week ago.

The ringgit gained versus the euro to 4.7854/7926 from 4.8280/8353 and appreciated against the British pound to 5.2983/3075 from 5.3944/3024 previously.

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