Ringgit likely to move range-bound against US dollar next week

KUALA LUMPUR, April 3 (Bernama): The ringgit is likely to move range-bound with a downside risk next week between 4.1350-4.1470 amid potentially better oil prices and concern over a slower economic recovery.

An analyst said the stable demand for oil in the past week may accelerate following data which showed an increased of air travelling activities, mainly from two major consumers, the United States and China.

"Demand and output for business operations are also seen to be moving in tandem, indicating a stabilising global oil market, which is favourable for the ringgit as it closely correlates with oil prices,” she said.

On Friday as at 6.15 am CST time, May contract for Brent crude rose almost 3.4 per cent to trade at US$64.86 per barrel.

On the other hand, the analyst said support for the ringgit may be offset by the recent Bank Negara Malaysia (BNM) report which noted household debt-to-gross domestic product ratio rose to a new peak of 93.3 per cent as at December 2020, from the previous record high of 87.5 per cent in June 2020.

In its Financial Stability Review for Second Half 2020 report, the central bank said that concern over high household debt is that it may lead to rapid deleveraging by households in the aftermath of a crisis, thus dampening or derailing the economic recovery.

"This likely shows that more Malaysians are not having enough disposable income or money in their pockets, and this will directly impact the expenditure for the services and retail sector as budgets are tighter, thus not able to spur economic growth,” she said.

She also said with the upward movement in oil prices, there will be more pressure in consumers’ spending and inflation would rise driven by underemployment.

"With this condition, I think the Overnight Policy Rate (OPR) cannot be raised significantly, at least over the next one year as time is needed to correct the labour market,” she added.

Meanwhile, backed by optimism on high US economic recovery and stabilising oil prices, Axi chief global market strategist Stephen Innes is expecting the ringgit to move between 4.13 and 4.15 against the US dollar.

On a Friday-to-Friday basis, the ringgit was higher versus the US dollar to 4.1380/1420 from 4.1445/1485 a week earlier.

The local note also traded easier against other major currencies.

It fell against the Singapore dollar to 3.0780/0816 from 3.0778/0814 a week earlier and weakened against the Japanese yen to 3.7455/7494 from 3.7853/7900.

The ringgit decreased marginally vis-a-vis the British pound to 5.7241/7309 from 5.7153/7224 on Friday last week and contracted against the euro to 4.8733/8797 from 4.8872/8927 a week ago. - Bernama

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