Ringgit advances against US dollar, highest since August 2011

KUALA LUMPUR: Malaysia's ringgit advanced against the US dollar on
Tuesday, rising to a high of 2.9570, which was the strongest since
August 2011 after the Barisan Nasional secured 133 of the 222
Parliamentary seats to form the Federal Government.
At 9.44am, the ringgit was quoted at 2.9659 compared with the previous close of RM2.9793.
BIMB
Securities Research said the ringgit strength "is only tentative" and
focus could turn towards fiscal consolidation after the post election
excitement dissipates.
To recap, o Monday, the ringgit gained 2%
in a single trading day as the election risk was over and thus boosted
investor sentiment.
"However, we do not expect this momentum to
last long. For the next few weeks, we expect the US dollar/ringgit to
remain volatile before political dust settles down.
"Some FX
volatility is possible given that opposition leader Anwar Ibrahim is
disputing the results of the elections. Still, cabinet formation as
well as impact on ruling party line-up will be the guiding light for
the ringgit," the research house said.
Overall, BIMB Research
expected the ringgit's strengthening to remain and the currency to stay
relatively stable for the rest of the year.
It cited several
factors for a stronger ringgit, which included the removal of 13th
General Election risk premium and also continued global quantitative
easing, which drives liquidity into this part of the world.
Other factors were the strong current account surplus; Bank Negara Malaysia
to keep its policy rate stable; robust domestic demand as well as a
build-up in foreign exchange reserves that enhances shock absorption
ability of this country.
"We project the ringgit to strengthen to 3.0200 by end of 2013," it said.