The local currency’s rally may just be a temporary relief, say market watchers.
Bank Negara Malaysia is unlikely to raise the overnight policy rate when it meets on Thursday, given slowing inflation and growth.
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. “The third quarter has revealed some relief factors – passing state elections and China stepping up on stimulus,” Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd in Singapore, said, referring to the ringgit’s gains.
The ringgit remains vulnerable to factors such as lingering political tensions, a sharp correction in oil prices in case of a global downturn, and a bumpy China recovery, according to Varathan.“The ringgit’s outperformance seems to be driven by improving export conversion ratio,” says Moh Siong Sim, FX Strategist at Bank of Singapore Ltd.
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