PETALING JAYA: The ringgit, in tandem with a host of other regional and international currencies, gained against the mighty US dollar, which faced some selling following the gridlock anticipated from the midterm elections there.
The ringgit gained some 450 points, or 0.95%, against the greenback yesterday to 4.6895.
However, currency analysts warned it may be too early to say if the ringgit has hit an inflection point, as the rise was more likely a temporary weakening of the greenback rather than a genuine strengthening of the local currency.
With Malaysia going to the polls next weekend, the direction that the ringgit will take towards the end of 2022 would largely hinge on the results of the 15th General Election (GE15).
A currency analyst with a foreign bank said the weakening of the greenback is a consolidation rather than the end of an uptrend, with current gains backed by higher emerging-market equities and the greenback rally looking overstretched technically.,
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He said any sustainable gains could emergence if new data signals that inflation is about to ease off in the United States and lead to a pivot in Federal Reserve (Fed) policy stance.
Centre for Market Education chief executive Dr Carmelo Ferlito believed it is too soon to suggest that the strengthening of the ringgit is a turning point, as the gains made are marginal.
“While looking at the appreciation this week against the dollar, we should also monitor the ringgit’s behaviour towards the euro, which has regained lost ground against the Malaysian currency.
“Both domestic and external factors are going to play a role as far as both these scenarios remain quite uncertain,” Ferlito told StarBiz.
Globally, uncertainties still affect inflationary trends and commodity prices while back home, the outcome of GE15 and how the new government would set new economic policies would dictate how the ringgit would move, he said, adding that any long-term prediction now may not hold water.
Ambank Research group chief economist Dr Anthony Dass maintained his view that the dollar’s strength will continue to be supported in the final quarter of the year by more rate hikes by the Fed, on top of it being seen as a safe haven amid recessionary fears and persistent geopolitical tensions.
Dass believed any meaningful strengthening of the ringgit will possibly come post-GE15 and coupled with the cyclical decline of the greenback, which should see the ringgit settle at around RM4.40 to a dollar in the final quarter of next year.