Positive outlook for ringgit despite falling most in five months Tue

According to the CIMB Investment Bank Bhd regional rates and foreign exchange strategist Suresh Kumar Ramanathan, the ringgit is expected to retain its positive outlook despite falling the most in five months yesterday fuelled by concerns over capital controls and fears of a rebound in the US dollar.

The ringgit would still be strong and was one of the top performers in the region year-to-date.

This is because a big influence of its fall yesterday was only based on ‘fears’ brought about by a newswire report on caution over capital controls in the region as well as the ‘positive’ outlook for the US dollars.

Bank Negara did not revise the 2.75% overnight policy rate last week after three consecutive increases since March this year and warned against the risk of excessive capital inflows.

The central bank said greater vigilance was needed as the influx of funds might bring risks to macroeconomic and financial stability in emerging market economies.

The Group of 20 leaders summit in Seoul last week ended with a stance that developing nations could adopt regulatory steps to deal with capital inflows to help damp currency swings and prevent asset bubbles.
Suresh said the recent strengthening of the greenback was mainly due to trading players trying to lock in profits before Thanksgiving on Nov 25 as opposed to structured long dollar position. “We still retain the target for the ringgit against the US dollar at 3.02 for short term,” he said.

The ringgit slid 2.1 sen to 3.13 against the US dollar yesterday. But according D. Sivadass, a currency forwards trader at EON Bank Bhd quoted by Bloomberg, growth is tapering off and there is a veiled message against excessive fund inflows, especially the speculative type.

   
According to Suresh, the dollar is supported because of an aversion to risky currencies.

The country’s export growth had slowed to 6.9% year-on-year in September as the low-base effect was diminishing compared with the 10.6% growth in August.

Apart from Malaysia, other regional currencies also traded lower due to concerns over capital controls in the region to limit currency gains. ( Source: The Star Online)