PETALING JAYA: The ringgit climbed to one-year high, buoyed by the higher price of crude oil and rising prospect of an interest rate hike happening next year.
The ringgit was traded at 4.1757 yesterday against the US dollar.
The sustained interest in crude oil prices on the international markets has seen traders anticipate that the ringgit could soon recouple its correlation with crude oil.
Second Finance Minister Datuk Seri Johari Abdul Ghani said in Parliament yesterday that for every US$1 per barrel increase in world crude oil price, the government would earn an additional income of about RM300mil.
“The ringgit’s positive correlation with Brent crude will probably return and strengthen, especially where the government’s projection for Brent is particularly conservative at US$52 per barrel,” Peter Chia, a foreign-exchange strategist at United Overseas Bank Ltd told Bloomberg.
“If the current growth momentum continues, together with increasing hawkishness from Bank Negara, we are fairly confident USD/MYR will gravitate toward our end-2018 target of 4,” he said.
The local currency was traded mixed against the other currencies as at press time. It would cost RM3.08 to buy one Singapore dollar. One ringgit can be exchanged for 7.91 baht, 12.2 Philippine pesos and 3,242 rupiah. It would cost RM4.94 to get one euro and RM5.51 to purchase a British pound.
Socio Economic Research Centre executive director Lee Heng Guie said that the ringgit’s rise is also due to the dollar being on the defensive.
“If economic conditions continue to strengthen with another quarter of strong gross domestic product growth of 6%, this could set the stage for a change in tone in monetary policy with prospects of interest rates locally possibly moving higher, depending also on growth prospects and the inflation outlook,” Lee told StarBiz.
“Oil prices have improved but buying flows in terms of foreign money buying into local assets such as stocks and bonds that will create demand for the ringgit is still not there.
“As the general election is around the corner, there is still some cautiousness to be expected and the first half of next year is still uncertain for the ringgit,” he added.
Lee said that the ringgit could end on a stronger note by the end of the year on anticipation of a change in monetary policies by the Monetary Policy Committee, which will meet in January 2018.
Brent crude oil last traded at US$61.58, a shade lower from its two-year high of US$64.27 price point that was seen early last week.
Oil took a tumble after the International Energy Agency cut its oil demand growth forecast by 100,000 barrels per day (bpd) for this year and the next, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018.
However, oil is still hovering near its two-year highs, analysts commented adding that the commodity had risen from the depths and commodity-linked currencies such as the ringgit could soon play catch-up with the new trend.
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