KUALA LUMPUR (April 12): The ringgit erased gains after strengthening to its firmest intraday level at 3.8735 against the US dollar.
At 2:08pm, the ringgit weakened to 3.8930 against the US dollar. Earlier, the ringgit strengthened amid a weaker US dollar, which led to higher crude oil prices at above US$40 a barrel.
Affin Hwang Investment Bank retail research head Datuk Dr Nazri Khan wrote in a note today that the ringgit had strengthed "sharply by 11% against the US dollar (from 4.4000) since the end of last year and is no longer significantly undervalued."
"The reversal of ringgit weakness has accelerated, following comments earlier this week from Japanese Prime Minister Shinzo Abe stating that Japan will refrain from arbitrary intervention and seeks to avoid competitive currency devaluations, which has acted as a green light for more funds inflow from Asia into Malaysia in the near-term," Nazri said.
The ringgit had strengthened against a weaker US dollar, after the US Federal Reserve Chair Janet Yellen said the central bank should be cautious in its interest rate hike assessment.
The ringgit tracks stronger crude oil prices, as the commodity forms a crucial portion of the Malaysian economy and government revenue.
The US dollar and crude oil prices have an inverse correlation, as a weaker US dollar makes the US dollar-denominated commodity cheaper in world markets
Reuters reported that US crude oil fetched US$40.17 a barrel, after rising to a three-week high of US$40.75 on Monday. Brent crude, which popped above US$43 a barrel to a four-month peak overnight, traded at US$42.62.
The dollar's recent depreciation has boosted commodity prices and crude was lifted by hopes that oil producers would agree at a meeting in Doha next Sunday, to curb output.