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Stable oil price, weak US dollar to lift ringgit next week

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by April 9, 2016 General

Shinzo Abe monetary stance gives the ringgit a lift. — Reuters file picShinzo Abe monetary stance gives the ringgit a lift. — Reuters file picKUALA LUMPUR, April 9 — The ringgit will likely be on an uptrend next week as crude oil prices have stabilised between US$35 per barrel and US$40 per barrel, coupled with weakness in the greenback.

Affin Hwang Investment Bank vice-president and head of retail research Datuk Dr Nazri Khan Adam Khan said the ringgit was no longer significantly undervalued as it had increased sharply by 11 per cent against the greenback from the 4.4 level since the end of last year.

“The reversal of the ringgit’s weakness accelerated following comments from Japanese Prime Minister Shinzo Abe. earlier this week, that Japan would refrain from arbitrary intervention and seek to avoid competitive currency devaluations,” Nazri Khan told Bernama.

“This has acted as a green light for more funds inflow from Asia into Malaysia in the near-term.

“The snail’s pace at which the Federal Reserve was tightening its monetary measures also helped raise funds into the emerging market including Malaysia.”

Improving crude oil prices would also renew optimism towards the local note, as this would help Malaysia’s oil and gas revenue.

Nazri Khan said the international benchmark, Brent crude rallied more than 5 per cent in the previous session after US crude inventories showed a first decline in two years and touched the US$40 a barrel mark for the first time in a week.

The ringgit also supported fresh inflow of foreign holdings of ringgit-denominated bonds, which saw a respectable positive net increase of RM11.5 billion.

“For the first quarter this year, foreign funds turned net buyers at RM5.5 billion, a reversal from a net outflow of RM3.3 billion in the same period a year ago,” said Nazri Khan.

The local note ended at 3.9000/9050 against the greenback yesterday, lower than 3.8880/8950 registered the previous Friday.

It weakened against the Singapore dollar to 2.8895/8950 from 2.8826/8895 last week and declined versus the yen to 3.5796/5852 from 3.4603/4675.

It also fell against the euro to 4.4394/4466 from 4.4315/4411 but rose against the British pound to 5.5013/5092 from 5.5692/5815, previously. — Bernama

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