In the past two years, we have seen significant correlation between ICE Brent Crude oil price and MYR, providing a high degree of predictability for MYR based on movement in ICE Brent Crude oil price
The available daily prices of MYR/USD and ICE Brent Crude oil are extracted from 1 Jan 2014 till 2 Feb 2016 and a simple regression analysis is performed:
The statistical outcome is as follows:
A linear trend model is computed for Myr/Usd given ICE Brent Crude. The model may be significant at p <= 0.05.
|Model formula:||( ICE Brent Crude + intercept )|
|Number of modeled observations:||534|
|Number of filtered observations:||0|
|Model degrees of freedom:||2|
|Residual degrees of freedom (DF):||532|
|SSE (sum squared error):||0.0855409|
|MSE (mean squared error):||0.0001608|
|p-value (significance):||< 0.0001|
Individual trend lines:
|Myr/Usd||ICE Brent Crude||< 0.0001||532||ICE Brent Crude||
Given the statistical significance of the regression analysis (R-squared of 0.81583 and p-value of <0.0001), we could derive a simple formula to predict the movement of Ringgit based on the movement of ICE Brent Crude Oil:
MYR/USD = 0.0009849 x ICE Brent Crude Oil Price (USD/bbl) + 0.206827
What is the forecast range of Brent Crude Oil?
Scenario 1: USD40-60
Vitol CEO says crude to stay between $40 and $60 for 10 years
Scenario 2: USD25-40
Scenario 3: USD1o or USD20
What is the forecast of Ringgit?
Based on the forecast range of Brent Crude Oil of between USD10/bbl and USD60/bbl, we may see the Ringgit possibly trading between RM3.76 and RM4.62:
This is a simple desktop analysis. Foreign exchange movements are subject to numerous macro factors. Nevertheless, given the significance of the statistical relationship, this allows us to forecast a broad predictable range for the Ringgit.
DISCLAIMER: THIS SITE IS FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS.