Supercharged Commodities May Rescue Ringgit Hit by Covid Surge

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Malaysia’s worsening Covid outbreak is taking a toll on the ringgit but buoyant commodity prices may offer some support.

Elevated crude and palm oil prices are likely to boost the nation’s export earnings and offer some reprieve to a currency that has trailed all its Asian peers this month, according to Australia & New Zealand Banking Group Ltd. The ringgit has slid about 1.3% versus the dollar in May as Malaysia overtook the global pandemic hotspot of India in confirmed infections per capita.

Supercharged Commodities May Rescue Ringgit Hit by Covid Surge

The currency has come under siege on concerns that the curbs on movements aimed at tackling a fierce new wave of infections will hurt an economy showing nascent signs of a recovery. Still, the authorities may welcome a weaker ringgit as it would help make exports more competitive.

“USD/MYR is near key resistance at 4.15, but any further weakness in the ringgit will be limited by favorable commodity prices for the country’s major exports,” said Khoon Goh, head of Asia research at ANZ in Singapore. “Oil and palm oil prices are still elevated despite the recent fall.”

Supercharged Commodities May Rescue Ringgit Hit by Covid Surge

The ringgit was little changed at 4.1423 per dollar in late morning in Asia on Thursday. It slid to 4.1497 on Monday, the weakest level since April 1.

Brent crude is trading at around $69 per barrel, near the year’s high of $71.38, while crude palm oil is at 4001 ringgit ($966) a ton after rallying as high as 4,525 ringgit this month.

Palm oil, of which Malaysia is the world’s second-biggest producer, has risen more than 10% this quarter on supply concerns and a rally in competing vegetable oils.

Still, restrictions on the plantations industry to rein in the surge in cases may act as a near-term drag. All workforce in agri-commodity sectors including palm oil, rubber, cocoa, and biodiesel will operate at 60% capacity, the government said Wednesday.

©2021 Bloomberg L.P.

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