Ringgit expected to consolidate next week

KUALA LUMPUR: The ringgit is expected to trade sideways against the US dollar next week on concerns over plummeting oil prices amid fragile global sentiment, analysts said.

The benchmark Brent crude oil price hovered near 12-year lows and traded at US$30.54 at 5pm on Friday as compared with US$31.03 per barrel on Thursday morning.

Affin Hwang Investment Bank Vice-President and Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the local unit might continue to trend lower on global growth outlook, China's economic slowdown, prospects of renmimbi devaluation, Saudi-Iran tension, weaker local economic data and falling oil prices which may dent the short-term traders psychology.

"Another day of relative instability in the Chinese currency and equity markets also helped underpin the more negative mood. We note that the People's Bank of China failed to give guidance on the renminbi, once again pushing worries about a further depreciation of the currency," he told Bernama.

On the home front, Malaysia's Industrial Production Index (IPI) in November climbed a marginal 1.8% year-on-year (y-o-y), the slowest in 16 months and significantly lower than consensus expectations of 4.1%.

The growth was also much weaker compared to the October expansion of 4.2% due to manufacturing slowdown and mining sector contraction.

Manufacturing output, which makes up two-thirds of the IPI, was up 4.1% y-o-y, the slowest pace in nine months, and the weak economic data may suggest a breather in the local economy, which may cap its upside momentum.

However, Hong Leong Bank Senior Manager for Bond and Economic Research, Choong Yin Pheng said the local unit might gain strength next week, relying on oil prices and updates from China as the catalysts.

"I think there is a revival market sentiment as we saw the oil prices rebounding on Thursday. Apart from that, the market is awaiting the release of China's fourth-quarter gross domestic product report, which will give fresh indication of China's economy and guide investors," she added.

On a separate update, Bank Negara Malaysia is expected to have its first Monetary Policy Committee (MPC) meeting on Jan 21, 2016.

In the MPC meeting held on Sept 11, 2015, the central bank had decided to maintain the Overnight Policy Rate (OPR) at 3.25%.

The revision of Malaysia's OPR is unlikely as at the current level of the OPR, the stance of monetary policy remains accommodative and supportive of economic activity.

Regionally, Bank Indonesia on Thursday announced a 25-basis point cut in its OPR to 7.25%, a move to support the growth of its withering domestic economy.

This has advocated the country's economy and aided investor sentiment, which was stumbling from a terrorist attack in its capital city.

For the week just ended, the ringgit touched the 4.40 level against the US dollar on Jan 11, putting the currency near to the lowest trading value of 4.46 against the greenback on Sept 29, 2015.

On a weekly basis, the local unit depreciated further against the greenback to 4.3965/3035 from last Friday's 4.3800/3900.

It declined against the Singapore dollar to 3.0483/0544 from 3.0472/0550 last Friday and eased against the yen to 3.7458/7524 from 3.6993/6093 previously.

The ringgit went down against the euro to 4.7917/7011 from 4.7611/7737 and ended higher against the British pound to 6.3121/3230 from 6.4014/4182. – Bernama