Could the dollar-ringgit breach RM4.30 due to risk aversion?

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Dollar-Ringgit Could Breach RM4.30 Amid Risk Aversion

The dollar-ringgit exchange rate may surpass the psychologically significant RM4.30 mark for the first time since July 2017, driven by a renewed wave of risk aversion and further declines in oil prices. This outlook stems from the current market sentiment, where concerns over Covid-19 are dampening investor appetite for risk.
External Factors to Drive Ringgit Performance

With no major domestic economic releases scheduled for the upcoming week, external factors are poised to be the primary drivers of the ringgit's performance. Market analysts suggest that the currency pair is currently showing signs of being slightly overbought against the US dollar. While some moderation might be observed in the immediate future, the exchange rate is expected to remain above the RM4.20 per dollar level, unless there is an unexpected shift towards risk-on sentiment.
Oil Price Declines and Risk Aversion as Key Triggers

A significant factor that could push the dollar-ringgit above RM4.30 is a combination of increased risk aversion and continued drops in oil prices. Such conditions typically lead to a heightened demand for dollar assets, as the US economic outlook is perceived to be more stable compared to other developed economies. This resilient demand for the dollar is likely to constrain the upward potential of Asian currencies.
Ringgit's Recent Performance Against Major Currencies

In the preceding week, the ringgit concluded trading lower against the US dollar, closing at 4.2750/2800 compared to 4.1700/1750 the week prior. The local currency also experienced depreciation against a basket of other major currencies. It weakened against the Singapore dollar, moving to 3.0360/0406 from 3.0222/0267, and against the Japanese yen, falling to 4.0228/0279 from 4.9643/9701. Furthermore, the ringgit declined against the euro, trading at 4.7730/7790 compared to 4.7088/7161. However, it showed some resilience against the British pound, appreciating to 5.3822/3902 from 5.4156/4237.

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Could the dollar-ringgit breach RM4.30 due to risk aversion?

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