KUALA LUMPUR: The ringgit is likely to move range-bound with a downside risk next week of between 4.1350 and 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.
Last Friday, the May contract for Brent crude rose almost 3.4% to trade at US$64.86 (RM269) per barrel.
The analyst said support for the ringgit may be offset by the recent Bank Negara report which noted household debt-to-gross domestic product ratio rose to a new peak of 93.3% as at December 2020, from the previous record high of 87.5% in June 2020.
In its Financial stability review for second half 2020 report, the central bank said 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 would be more pressure in consumers’ spending and inflation would rise driven by underemployment.
“With this condition, I think the overnight policy rate cannot be raised significantly, at least over the next one year as time is needed to correct the labour market, ” she added. — Bernama