MALAYSIAN RINGGIT STRENGHTENS TO 5-MONTH HIGH

PETALING JAYA, Malaysia -  The ringgit strengthened to its highest level in three months to RM3.5462 at 8am yesterday, after more disappointing US economic data reinforced expectations that the US Federal Reserve (Fed) will not hike interest rates anytime soon. 

The recovery of oil prices was another promoting factor boosting the ringgit, as higher oil prices will ease the deficit pressures on the country.

The ringgit touched its weakest point on March 20, when it hit the RM3.7333 level. At its last price of 3.5635, the ringgit was still down by 1.92% from the 3.4965 level on a year-to-date basis. This is still one of its weakest levels in five years.

Measures by the Government over the last few months have included scrutinizing companies and individuals making big investments overseas in an effort to prevent any outflows of the ringgit for speculative purposes.

The US economy has been plagued by soft data over the last few months. The latest was last Friday, when data showed that business investment spending plans fell for a seventh straight month in March. 

The poor performance was likely aided by a strong dollar and lower energy prices.

The dismal report was just one of a slew of downbeat data on retail sales, industrial production, employment and housing starts that have hinted at insufficient growth momentum in the US economy. 

This, in turn, has cemented the view that the Fed will delay raising interest rates until later this year.

Manokaran Mottain, chief economist at Alliance Bank Malaysia Bhd said the rising oil prices had also helped the ringgit and were a blessing to the country. With Malaysia being an oil producing country, higher oil prices would increase the earnings of national oil company Petroliam Nasional Bhd (Petronas), and thus potentially increase its dividends and royalties to be paid to the Government.

For the month of April, oil prices have more or less been on an upward trajectory. At US$64.14, it is now up 11.91% from its year-to-date level of US$57.33. Brent hit its low of US$46.59 on Jan 13.

Earlier this year, Petronas said that it would be planning its budget for 2015 based on an oil price forecast of US$55. In fact, some key projects would be deferred.

On a side note, foreign funds have been buyers of the Malaysian market over the last few weeks.

• Malaysian Industrial Development Finance Berhad(MIDF) Research head, Zulkifli Hamzah said that the gradual build-up of a Malaysian equity portfolio by foreign investors continued for the sixth consecutive week.

Source: The Star