MYR: Probing the oil ‘disconnect’ - ANZ

Analysts at Australia and New Zealand Banking Group (ANZ) explain the changing dynamics in the correlation between the Malaysian ringgit and oil prices.

Key Quotes:

“The Malaysian ringgit has decoupled from oil prices in recent years. We believe there are both ‘temporary’ and ‘durable’ factors at play behind this decoupling.

Temporary’ factors include the recent divergence in crude oil, LNG and palm oil prices, and the weakness in global growth.

‘Durable’ factors refer to the structural changes in Malaysia’s energy trade, given its domestic consumption trend has been outstripping the production trend for many years now.

Our view is that these factors will maintain the disconnect between the ringgit and oil prices for some time.”