However, as the Covid-19 scare in the US is overblown and data likely to normalise next week, it may provide support to the oil price and benefit the ringgit, according to AxiCorp global chief market strategist Stephen Innes.
“But overall the crude oil market, which is currently below US$40 per barrel, remains sick due to the supply overhang and patchy demand recovery in the US.
“And it’s a double whammy for the ringgit as the US Federal Reserve has clearly opened the door for the dollar to move lower but the Covid-19 resurgence in the US spooked the currency market, impacting it (the ringgit),” he told Bernama.
To recap, the Opec and allies had earlier embarked on the largest coordinated oil production cut regime in history in May at 9.7 million barrels per day .
Meanwhile, Bank Islam Bhd chief economist Mohd Afzanizam Abdul Rashid said the ringgit was quite volatile during the recent week on a technical correction after it appreciated considerably alongside the sharp rebound in the equities market.
“The latest US Federal Reserve projection showed that the US benchmark rate is likely to remain near zero until 2022. In that sense, there is a great amount of economic uncertainties that could impede the economic recovery.
“In the absence of vaccines, a possible relapse in new Covid-19 infections is always a possibility and that could render instability to market and business sentiments,” he told Bernama.
Mohd Afzanizam said the correction in risky asset prices shows investors are reassessing the durability of the recovery/reopening of the economy.
From a technical standpoint, the ringgit versus the greenback appears to be in an overbought position and it looks rather toppish at the moment.
“At the current juncture, the resistance and support levels stand at RM4.2972 and RM4.2502. As such, expect the ringgit to stay weak in the immediate term,” he said.
Throughout the week, the ringgit was traded mixed against the US dollar, ranging between 4.2430 and 4.2720.
On a weekly basis, the ringgit ended slightly lower at 4.2650/2700 against the greenback from 4.2640/2700 recorded last week.
The local unit also fell against the Singapore dollar to 3.0706/0753 from 3.0604/0658 but improved against the euro to 4.8280/8353 from 4.8328/8409.
The local currency declined to 3.9663/9717 from 3.9019/9085 when compared with the Japanese yen a week ago, and edged down against the British pound to 5.3944/3024 from 5.3859/3947 previously. — BERNAMA