RINGGIT AT STRONGEST AGAINST US$ SINCE DEPEG

PETALING JAYA: The ringgit appreciated to its strongest level against the US dollar since the de-peg 17 months ago when it touched 3.5050 before settling at 3.5075 at 5pm Tuesday.
The currency is the second-best performer in Asia-Pacific so far in 2007, with economists attributing the good showing to a combination of domestic and regional factors.
CIMB head of economics Lee Heng Guie opined that the Bank Negara move to remove limits on banks’ investment in stocks as well as liberalisation measures in the property sector had injected “good sentiments” into the local markets.
“Such initiatives have led to more portfolio inflow of investments, both local and foreign, as well as lending fundamental support to the ringgit. Malaysia’s growth is also projected to be strong this year,” said Lee.
The “laggard” characteristic of the local unit could also mean potential for more upside this year, he said, but further strengthening would be due to Malaysia’s own fundamentals and China’s willingness to accept a more flexible approach towards its renminbi.
OSK Securities economist Sia Ket Ee felt the strengthening pace for the ringgit was fine, given Malaysia’s healthy balance of payments and trade surplus.
“That is supportive of the ringgit’s rise. Meanwhile, China has said it is all right with a more flexible renminbi if its trade surplus remains strong and we believe its trade surplus will be strong going forward,” Sia said.
He said if China allowed its currency to appreciate, there would be further scope for other regional currencies to strengthen as well, but he expected the ringgit’s 3.50 resistance to be strong.
“The risks to the upside would be good economic data from the US, meaning the greenback could stop weakening and stem the strong run in Asian currencies,” Sia added.
Meanwhile, RAM Consultancy & Services chief economist Dr Yeah Kim Leng said the strengthening could be a bit too “steep”.
“It could yet prove to be a concern for thin-margin exporters. However, the issue would be to see the extent the current appreciation rate would hold,” Yeah told StarBiz.
He concurred that local and regional factors had combined to push the ringgit up versus the dollar, together with other regional currencies.
“The recent bullish performance by the KL Composite Index and the Ninth Malaysia Plan projects are positive factors on the domestic front. Regionally, investors are also encouraged by the good economic performances of Asian countries compared with other regions,” Yeah said.
Bank of Tokyo-Mitsubishi currency analyst and economist Fukaya Koji agreed with Yeah’s assessment of the Asian economies, saying that investor sentiments had been “strong”.
He told Bloomberg: “We can expect good inflows to stocks. The ringgit will remain on the gradual appreciation path.”

Source : TheStar (by Keith Hiew, http://biz.thestar.com.my/news/story.asp?file=/2007/1/10/business/16524435&sec=business)