KUALA LUMPUR, Jan 29 ― The ringgit gained notable strength today mainly against the US and Singapore dollar, after the government unveiled the recalibrated 2016 Budget yesterday which focused on sustaining growth.
It's a sign the market has well received the recalibrated budget, which was more realistic and apt to the current scenario, Hong Leong Bank's Head of Fixed Income & Economic Research, Choong Yin Pheng, said today.
The ringgit was traded at RM2.90 versus the Singapore dollar at 11.30am today, up 3.87 per cent compared with RM3.01 when it first slipped to above RM3 on August 24 last year and against the US dollar it strengthened to 2.85 per cent to RM4.14 as compared with RM4.25 before.
The 2016 Budget tabled last October was based on oil price at US$48 per barrel, but in the short span of three months it has tumbled to below US$30 per barrel, hence the need for a recalibrated budget.
In the announcement yesterday, Prime Minister Datuk Seri Najib Razak said the sliding oil price has impacted the national revenue at an estimated RM7 billion to RM9 billion.
However, he gave an assurance the prudent measures undertaken by the government would ensure savings of RM9 billion in operation and development expenditure, without compromising the people's and nation's needs
“We think globally and the positive sentiment is trickling in, especially with the improving oil prices,” she told Bernama here today.
Earlier today, the local currency was traded higher against British pound at 5.9797/9961 compared with 5.9949/9051 and was up against the euro at 4.5511/5637 from 4.5828/5906 yesterday.
The news of possible cut in oil output by up to five per cent has helped spur the oil prices with the benchmark Brent futures up by as much as US$8 to nearly US$36 a barrel.
“As an oil-producing country, Malaysia is set to benefit from the improvement in oil price which can also help stimulate the ringgit further,” she said.
Besides this, the local currency also gained further support as the US economic growth weakened due to low global demand, she said.
An analyst said that investors were shifting to other currencies, including the ringgit, on risks that Singapore's central bank may ease its monetary policy to support economic development and tackle inflation.
Hence, the Singapore dollar could also been weakening further amid a challenging economy in the island republic, she said.
On whether the ringgit would gain back its momentum to RM3.77 level against the US dollar, the analyst said that was something one has to wait and watch.
“A lot of factors need to be taken into consideration. There are still uncertainties in the global economy and the decline in the currency valuation is not unique to Malaysia,” said the analyst, who requested anonymity.
The ringgit had depreciated by 11.3 per cent against the US dollar, from RM3.77 in June 2015 to RM4.25 as at January 27, 2016.
Among the currencies affected are the Brazilian real (-23.2 per cent), Chinese renminbi (-5.7 per cent), Canadian dollar (-11.3 per cent), Russian rouble (-29.3 per cent) and Singapore dollar (-5.6 per cent).
Malaysian authorities had said many times the ringgit was undervalued and did not reflect the true economic fundamentals. ― Bernama
