Further Stabilisation Of Oil Prices Seen Favourable To Ringgit Next Week

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The ringgit may trade at the 4.25-4.27 level next week provided there were no surprises coming from the Organisation of the Petroleum Exporting Countries’ (Opec) meeting
Opec and its allies will hold their respective meetings today to discuss an oil production agreement and whether to extend the record 9.7 million barrels per day of output cuts beyond June
Previously, Opec agreed to cut production in May and June to lift prices
AxiCorp global chief market strategist Stephen Innes said oil prices had been improving by the week and if the oil-producing allies were to agree to a production cut extension amid economic reopening optimism, oil prices could move higher next week
“And this should be favourable for the ringgit,” he told Bernama
The other reason for the ringgit uptrend is the weaker US dollar amid economic recovery hopes and improving global risk sentiment
“I think the ringgit will benefit from a catch up to regional sentiment,” he added
Crude prices have shown some signs of stabilisation throughout the week with crude Brent trading at the US$40 per barrel level
However, the skyrocketing tensions between the US and China limited the uptrend in the local unit
This is especially after President Donald Trump announced restrictions on Chinese airlines from flying into in the US from June 16 or earlier, in response to a similar ban by the Chinese government on American carriers from restarting services to China
In addition, the US has also decided to eliminate special trade privileges for Hong Kong in reaction to China’s decision to impose a national security law on the financial hub
Locally, the ringgit also got a boost from a rebound in the May Manufacturing Purchasing Managers' Index (PMI)
The headline IHS Markit Malaysia PMI rose sharply to 45.6 in May from a record low of 31.3 in April, indicating the economic downturn has bottomed out
IHS Markit said Malaysia's manufacturing sector showed signs of approaching stabilisation midway through the second quarter, with rates of reduction in output, new orders and employment all easing considerably
On Friday, Prime Minister Muhyiddin Yassin announced the RM35 billion National Economic Recovery Plan (Penjana) help revive the economy hit by Covid-19 pandemic
Forty initiatives were introduced under Penjana to address, among others, the increasing unemployment rate and propel businesses
In addition, Muhyiddin said more economic sectors will be opened if the conditional movement control order’s standard operating procedures continued to be observed
Throughout the week, the ringgit mostly traded higher against the US dollar, ranging between 4.2590 and 4.3150
On a weekly basis, the ringgit ended stronger at 4.2640/2700 against the greenback from 4.3450/3500
The local unit also rose against the Singapore dollar to 3.0604/0658 vis-a-vis 3.0768/0810 and improved against the euro to 4.8328/8409 from 4.8369/8433
The local currency was sharply higher compared to the Japanese yen at 3.9019/9085 from 4.0528/0586 a week ago but edged down against the British pound to 5.3859/3947 from 5.3435/3514 previously
- Bernama

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