Malaysia’s market watchers are viewing a nascent rally in the ringgit as a temporary reprieve rather than the start of a sustained recovery in the beleaguered currency.
The ringgit became only one of two Asian currencies to eke out gains against the dollar this quarter after finishing the first half of the year near the bottom of the leaderboard. Still, expectations for rally in the ringgit remain low as growth concerns in China, Malaysia’s largest trading partner, and a wide interest-rate gap with the US remain a drag.
“The ringgit outperformance seems to be driven by improving export conversion ratio,” says Moh Siong Sim, FX Strategist at Bank of Singapore Ltd. “But this could be temporary and the performance ranking may slip given the drag from still wide unfavorable interest rate differential vis-a-vis the dollar and lingering yuan depreciation pressures.”
Even Bank Negara Malaysia’s interest rate decision on Sept. 7 is unlikely to provide any tailwind for the ringgit. The central bank is expected to leave its overnight policy rate unchanged at 3% given the nation’s slowing inflation and growth.Monday, Sept. 4: Australia 2Q inventories and company operating profit, New Zealand 2Q terms of trade index
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