The Malaysian currency fell to a 2-week low against the US dollar on Wednesday (Feb 8) with the country's trade surplus dwindling and oil prices slide.
USD/MYR rose to 4.4460 from Tuesday's close of 4.4365, making a 0.21% decline in the ringgit. It is down 0.4% so far this week.
The surplus for December stood at MYR 8.72 billion, its lowest since September, and down from MYR 9.03 billion in November while the market was expecting at least MYR 9.30 billion.
Crude oil sales, an important revenue earner for Malaysia, was up 15.6% in December but continuing slide in the commodity's prices weighed on sentiment.
Oil prices fell in Tuesday's US session after American Petroleum Institute said crude oil in storage in the largest consumer of the commodity has risen 14.2 million barrels last week, far above analysts' forecast of 2.5 million barrels increase. Prices continued south on Wednesday.
Brent futures for April delivery was down 0.45% on the day at $54.8/bbl at 5:00 pm Singapore, which was an 18-day low for the contract.
BNM and Ringgit
The Malaysian currency has been moving sideways of late after seeing sharp volatility last year. At the April low for the USD/MYR pair, the ringgit was up more than 10% from end-2015 but then it plunged to as weak as 4.5405/dollar by November.
It held a range of 4.3848-4.4983 in December which it closed slightly weaker but strengthened nearly 1.3% in January.
The Malaysian authorities had taken specific measures to reduce volatility in the currency but some market analysts observe that it has also dampened the outlook for foreign investments to the country.
The Bank Negara Malaysia, Malysia's central bank, said on Jan 19 that it will continue to provide liquidity to ensure the orderly functioning of the financial markets.
"The ringgit, along with other emerging market currencies, has seen a reduction in volatility since the sharp adjustments experienced towards the end of 2016," the BNM said in the Jan policy statement which had the official policy rate unchanged at 3%.
"The implementation of financial market development measures has provided stability to the domestic foreign exchange market."
Technicals
Charts suggest 4.4545 and 4.4700 as the immediate resistance levels for USD/MYR ahead of the January high of 4.5000. A break of that level will open doors to fresh highs translating new all-time lows for the ringgit.
In case of a reversal, the pair will see support coming near 4.4300 and then at 4.4155. A break of that will mean multi-month highs for the local currency. The level then comes in focus will be 4.3848.
Data Ahead
The Q4 construction output (Feb 10), industrial output for December (Feb 10), December unemployment rate (Feb 13), retail sales for December (Feb 14), the Q4 GDP (Feb 16) and January inflation (Feb 22) are the important data points in focus for this month.
Analysts expect the unemployment rate to increase to 3.5% from 3.4% and the year-on-year GDP growth rate to ease to 4.1% from 4.3% in the three months to September. Inflation is forecast to have accelerated to 2% from 1.8%.
