(April 8): Some Malaysian importers snapped up dollars on Wednesday, capitalising on the greenback’s retreat, according to Citigroup Inc.
The dollar weakened as much as 1.4% against the ringgit as haven demand eased after the US and Iran agreed to a two-week ceasefire. Importers often use such instances to hedge currency risk, buying dollars when they are relatively cheap to lower import costs.
“There’s been opportunistic dollar buying from some importers today, particularly from the manufacturing and automotive sectors,” said Vandana Bhatter, Citigroup’s head of corporate foreign exchange sales for Asia-Pacific. Importers largely remained on the sidelines in the past one to two weeks when the ringgit traded above four per dollar, Bhatter added.
The ringgit has been under pressure since the war in Iran broke out, falling to as low as 4.0512 versus the dollar as risk sentiment deteriorated. Prior to the conflict, the currency had strengthened to an eight-year high of 3.88 per dollar, supported by strong domestic demand, buoyant exports and a surge in investment in Malaysia’s booming data centre sector.
While Malaysian importers have been taking advantage of the sudden dollar weakness, the nation’s exporters adopted a more measured approach.
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“Exporter activity has been primarily focused on covering residual short-term requirements, as many had already increased their hedges when the currency pair was above four-per-dollar levels last week,” said Bhatter.
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