Ringgit’s recent strength has picked up momentum as the new year dawns, now having breached the strong 4.0 psychological barrier against the greenback at 3.9927, the best since August 2016.
To the country, this is going to be a good news as it will help cap the rising cost of imports and lessen the already heavy burden of the public.
It is generally believed that the recent strength of the local unit has stemmed from the rising international crude oil prices and a lethargic US dollar, among other factors. The rising crude prices have boosted the upward swing of the ringgit.
In the meantime, according to dealers the poorer-than-expected consumer confidence in the United States has weighed down on the dollar, diverting the market’s buying interest towards Asian currencies and the ringgit.
The local unit has for the past several years come under tremendous selling pressure despite the country’s strong fundamentals. The ringgit touched a low of 4.5002 as a consequence of unfavorable local and foreign factors along with speculative selling.
Although a weaker ringgit augurs well for the country’s exports, it also raises import costs and pushes goods prices up.
Besides, a weak ringgit has also heightened the burden of Malaysian students overseas.
Fortunately, the local currency has picked up some steam to recover some of its earlier losses in recent weeks. Several encouraging economic figures were also released concurrently, including the sterling 6.2% Q3c GDP growth that has once again enlivened the market’s faith in the country. Meanwhile, the soaring oil prices and a soft dollar has further boosted ringgit’s surge.
Bank Negara hinted last month to raise the interest rate in a bid to boost the ringgit. The local currency has been buoyed by such anticipation. Ringgit rose 10.87% in 2017, its best showing in seven years, making ringgit the second best performing currency in the region after the Korean won.
Extending the year-end uptrend, the ringgit has continued its upward movement since the beginning of this year. This, coupled with the fact that the general election will be held this year, will see the local unit scaling a new high over the next few months.
As a matter of fact, the ringgit is still undervalued at this moment and there is still room for further appreciation. Experts have predicted that the ringgit could climb to 3.90 against the greenback.
Thanks to the encouraging economic numbers in recent months, the value of the oversold ringgit has been rectified. More importantly the ringgit must be back to more reasonable levels to reflect the country’s economic fundamentals.