(Bloomberg) – Forex traders brace for a busy week as the Federal Reserve prepares to cut debt buying. But the Malaysian ringgit seems surprisingly calm.
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The currency appears poised to withstand any volatility fueled by a withdrawal of US stimulus measures as the Malaysian economy rebounds amid an easing of restrictions linked to the virus. Increasing inventory inflows and a large trade surplus will also provide a buffer.
The ringgit rebounded from a one-year low as traders bet that a recovery in travel and trade will lift the economy out of its worst slump since 1998. A policy review on Wednesday will be the focus of attention , with the currency likely to get a boost if Bank Negara Malaysia gives an optimistic assessment of growth prospects.
The ringgit has climbed more than 2% in the past three months even as traders increased bets for the Fed to tighten policy. It rose 0.2% to 4.1403 per dollar on Friday.
Equity inflows have been a key pillar of the currency’s support, with global funds recovering around $ 400 million of local stocks in October, the largest monthly buy since early 2018.
Standard Chartered Plc expects the ringgit to end the year at 4.15 as strong domestic fundamentals offset global risks.
“Improving Malaysia’s terms of trade due to higher energy prices will offset other external headwinds like China’s growth and higher performance from developed markets,” said Divya Devesh. , Head of Currency Research for ASEAN and South Asia at Standard Chartered Bank in Singapore.
The trade surplus widened to 26.1 billion ringgit ($ 6.3 billion) in September from a year-round low of 13.75 billion ringgit reached in May. Strong demand for the country’s electronics and petroleum products helped to increase the surplus.
Malaysia’s economic growth is expected to accelerate to 5.5% to 6.5% in 2022, from an estimate of 3% to 4% this year, Finance Minister Zafrul Abdul Aziz said on Friday. A resumption of activities and an increase in global demand, coupled with rising commodity prices, will support the expansion, he said.
Technical data indicates that the Malaysian currency may appreciate. The dollar-ringgit pair fell 1.1% in October, with the 50-day moving average capping its rise, and now looks on track to test support at its September low of 4.13.
A one-week implied volatility gauge of the pair is trading around 6.01 steals from the year-long high of 7.42, suggesting that traders are not preparing for excessive swings in the following the Fed’s decision on November 3 rates.
The ringgit slipped more than 7% from May to August 2013 after the Fed announced it was planning to end its bond buying program.
Here are the main Asian economic data expected this week:
Monday, November 1: mortgage loans in Australia, China Caixin manufacturing PMI, South Korea’s trade balance, Indonesia CPI
Tuesday November 2: RBA political decision and speech by Debelle, building permit in New Zealand, IPC in South Korea
Wednesday November 3: Construction approvals in Australia, Q3 employment in New Zealand and RBNZ financial stability report, Bank Negara Malaysia rate decision, China Caixin services PMI
Thursday November 4: Australia’s trade balance
Friday, November 5: RBA statement on monetary policy, China and South Korea’s current account balance, Indonesia’s third quarter GDP, Philippines CPI and trade balance, Thailand CPI
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