Axi chief global market strategist Stephen Innes said the local currency might test the 4.05 level if the Brent crude hit US$50 next week.
He said oil prices had pared gains ahead of the Organisation of Petroleum Exporting Countries and its allies’ (OPEC+) meeting next week on reports of some breaking in the ranks.
Saudi Arabia and Russia tried to encourage oil producers to extend the quota cut, but Iraq, Nigeria and the United Arab Emirates wanted to pump more barrels.
"Provided that OPEC agrees to extend its current production quotas, the ringgit should continue to trade on the front foot as the market continues to expect the US dollar to weaken into year-end.
"This is in view of dovish combination of former Federal Reserve chairwoman Janet Yellen, which President-elect Joe Biden has chosen as his new Treasury Secretary, and the current chairman, Jerome Powell,” he told Bernama.
On a Friday-to-Friday basis, the ringgit appreciated to 4.0670/0710 against the US dollar, its highest in almost 11 months, compared with 4.0900/0940 in the previous week.
FXTM market analyst Han Tan said the ringgit was Asia’s second best-performer for the week, behind the South Korean won, as regional currencies continued to take advantage of the weaker US dollar.
He said Thursday’s Budget 2021 vote propelled ringgit to its strongest level against the greenback since January, allowing the local currency to erase all of its year-to-date losses against the US dollar that had been incurred since the height of the pandemic.
The ringgit’s gains were helped along by the rise in oil prices as well as the risk-on sentiment stemming from the positive developments surrounding the COVID-19 vaccine.
"Markets are anticipating that the group of major oil producers will delay plans to restore supply to global markets until March.
"Any other outcome that deviates significantly from the currently-held narrative could trigger massive swings in oil prices and, by extension, potentially in commodity-linked currencies as well,” he said.
Tan said the positive surprise in Malaysia’s October trade figures released Friday, which saw exports increase by 0.2 per cent to RM91.05 billion, also aided in the ringgit’s return to below the 4.07 mark against the greenback.
"US dollar/ ringgit is now primed to launch another attempt at breaking below the 4.05 support level, having been rejected before in January 2020 and also in March 2019.
"Overall, the dollar’s bias for weakness creates a conducive environment for the ringgit to rediscover pre-pandemic levels, with the recovery in oil prices providing further support for the Malaysian currency,” he added.
Meanwhile, the ringgit was traded mostly higher against other major currencies.
It rose against the Singapore dollar to 3.0380/0431 on Friday from 3.0434/0479 a week earlier, soared versus the Japanese yen to 3.9083/9133 from 3.9399/9445, and strengthened against the euro to 4.8479/8543 from 4.8495/8559.
However, the local currency fell vis-a-vis the British pound to 5.4319/4389 from 5.4295/4360 Friday last week. - Bernama
Did you find this article insightful?
90% readers found this article insightful