KUALA LUMPUR, 31 Jan: The ringgit is expected to consolidate next week and retrace back near the 3.60 level, but the case for further pressure remains.
The ringgit has been traded over 700 hundred basis points lower for the past two weeks and it is time for a minimum correction, a currency chartist said.
For the week just ended, the ringgit went down to 3.6290/6320 against the US dollar from Friday’s 3.6015/6045. The previous Friday, it was traded at 3.55 level and ended the week at 3.5580/5610.
“It could retrace back to near the 3.60 level next week on an improved risk appetite as a minimum correction,” he told Bernama.
It should happen sooner if not due to the Monetary Authority of Singapore’s (MAS) move to ease its monetary stance by surprise, said another trader.
MAS’ decision has triggered additional ringgit’s short positions by speculators, he said.
The Singapore’s central bank on Wednesday had surprised the markets by easing its policy to tackle deflation risks and support the island’s economy.
“MAS’ move boosted expectations that other central banks in Asia might follow suit and such expectations may drag the ringgit and other emerging Asian currencies to depreciate further in coming weeks,” he added.
Besides the MAS factor, the current market expectations were that the US Federal Reserve would stay the course towards increasing rates as hinted in its latest policy statement, and this was supportive of the dollar’s rally against other currencies.
On a weekly basis, the ringgit was down against the Singapore dollar at 2.6872/6916 from last Friday’s 2.6863/6905, its lowest level in 16 years.
The local unit also eased against the yen to 3.0825/0853 from 3.0439/0469 on Friday.
It was softer against the British pound at 5.4689/4745 from 5.3958/6021 as well as against euro at 4.1156/1198 versus 4.0593/0634 last Friday.