KUALA LUMPUR (Jan 14): The ringgit has strengthened 2.8% since December 2019, as the risk appetite of investors increases as US-China trade tensions temper.
The local note is now trading at RM4.06 against the greenback. In contrast, on Dec 2, 2019, it traded at RM4.1775 to the US dollar.
The last time the ringgit was trading in the RM4.06 range was in March 2019.
Within this month alone, the ringgit has strengthened 0.98% since Jan 8, when it was trading at RM4.10 to the US dollar.
When contacted by theedgemarkets.com, United Overseas Bank (UOB) Malaysia Bhd's Global Economics and Market Research senior economist Julia Goh said the ringgit's recent strengthening against the US dollar was in tandem with regional currency movements, including the yuan.
"This comes amid receding tail risks from US-China [trade tensions] and Brexit since December, US equities powering to fresh records, robust commodity prices and a return-to-favour of emerging-market carry trade," said Goh.
As far as the extent to which the ringgit will strengthen, Goh said the bank would monitor the rhetoric deployed in US-China trade relations following the signing of a Phase 1 deal tomorrow, as well as other lingering geopolitical risks and central bank actions.
"Generally, we are still cautious given the modest growth outlook ahead," she said.
Indeed according to Bloomberg data, other regional currencies have also strengthened against the greenback since December. The Indonesian rupiah, offshore Chinese renminbi and the ringgit were the top three gainers against the US dollar.
In its Weekly Money Review yesterday, MIDF Research said there was a continuous appreciation amid better performances from industrial production index (IPI) and manufacturing sales.
"Overall IPI grew by 2% y-o-y, the biggest gain in five months, and manufacturing sales rose by 5.3% y-o-y, the fastest growth in four months. Distributive trade expanded by 5.3% y-o-y, better than the previous month," the research house said while noting it expects to ringgit to average at RM4.18 during the year and end the year at RM4.20 against the US dollar.