KUALA LUMPUR: The ringgit climbed to the strongest since July 2018, erasing its virus-fuelled losses for the year.
The currency rose as much as 0.3% to 4.0483, as it breached the year’s previous high of 4.0515 against the US dollar reached in January. The gains came amid weakness in the greenback and a recent advance in crude prices.
The ringgit has climbed with Asian peers this quarter as the dollar weakened and risk assets were boosted by Covid-19 vaccine developments.
An easing of domestic political tension also helped, after Prime Minister Muhyiddin Yassin survived a key test to his leadership.
The next key level for the ringgit would be 4 per dollar, according to Australia and New Zealand Banking Group Ltd (ANZ).
“A weaker dollar is a key part of the ringgit’s strength, with the strong run in the Chinese yuan also helping to lift the currency as well given the strong historical correlation,” ANZ’s head of Asia research Khoon Goh said before the ringgit hit the high. “An improving global outlook has led to an improvement in oil prices.”
While the currency’s strength may be viewed as a vote of confidence, it also risks hurting Malaysia’s export-reliant economy which is slowly recovering from its biggest contraction in over two decades.
A revival in bond inflows could add to the ringgit’s upward trajectory as a search for yield lures global funds to emerging Asian debt.