THE ringgit has the potential to appreciate to 3.9 against the US dollar this year, given the weaker greenback and steady global oil prices, said an analyst.

MRR Consulting Sdn Bhd managing partner and investment advisor Ooi Kok Hwa said market players were generally not expecting the United States federal reserve to increase interest rates this year, causing the US dollar to weaken and providing a lift for the local note.

“Furthermore, the renminbi is gaining momentum and will probably continue to appreciate, thus benefiting the ringgit, given the two currencies’ positive correlation,” he told Bernama Saturday after giving a talk at a symposium organised by Kenanga Investment Bank Bhd in Kuala Lumpur today.

Ooi said the uptrend in the global oil price was also expected to provide a boost for the local note.

“The oil price is currently on the path of recovery and should maintain within the range of US$50 (RM205) to US$60 per barrel, with oil producers reaching a pact to reduce production,” he said.

On the downside, he said the firmer ringgit would pose a problem for Malaysian exporters as US dollar-denominated revenue would be lower in ringgit terms.

“Additionally, glove manufacturers will be negatively affected as their locally produced goods are more expensive in the world market,” Ooi said.

On January 9, shares of glove manufacturers such as Top Glove Corporation Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, and Supermax Corp Bhd declined significantly due to the firmer ringgit and higher crude oil prices.

“To manage the situation, these companies need to hedge their foreign currency exposure,” Ooi added. – Bernama, January 13, 2019.