SINGAPORE: After going from last to first in Asia, the Malaysian ringgit may be headed for a break — before resuming its rally.
Momentum indicators, including slow stochastics, show the ringgit is overbought. The currency has surged 3.6% against the dollar in the past month, the best performer as oil prices climbed and the central bank signaled a potential interest-rate increase.
It was the worst-ranked emerging Asian currency in the same four-week period last year, as a crackdown on speculators and expectations of a stronger greenback spurred outflows.
“There’s potentially a bit more room to go, but if you look at the chart, perhaps it may need a bit of consolidation at some point,” said Ng Kheng Siang, Asia Pacific head of fixed income at State Street Global Advisors in Singapore, which oversees US$2.7 trillion.
“It’s a catch-up play. Last year there were quite a number of issues affecting Malaysia.”
The ringgit has dropped for three straight days after surging to a 15-month high on Monday. Overseas investors bought almost US$2bil of Malaysia’s sovereign debt in September, the biggest inflow in four months.
“If you have some new money you may want to re-position in areas that haven’t done well but don’t look that bad,” Ng said.
“That’s why we’ve seen a late surge in Malaysian assets.” – Bloomberg