The ringgit is expected to strengthen to 4.2000-4.2500 against the US dollar by the end of the year, according to AmBank Research
KUALA LUMPUR (June 3): The Malaysian ringgit is expected to recoup its recent losses in the second half of this year (2H22) on a potential US dollar correction amid concerns over a possible global economic slowdown amid ongoing liquidity tightening , according to AmBank Research.
The Ringgit is likely to continue hovering around the 4.4000 level against the US Dollar in the near term, with a risk of further weakening to levels of 4.4500 to 4.5000 amid a strengthening Greenback and renminbi (RMB) weakening, AmBank Group said. Chief Economist Anthony Dass during a virtual market outlook briefing Friday, June 3.
“But moving forward to 2:22 a.m. I expect the ringgit to strengthen because by then all those US rate hikes would have factored into everything we’ll be talking about 2023 on how the economy will slow down and that would cause a correction in the US dollar,” he said.
Dass estimated that the ringgit should return to levels of 4.2000-4.2500 against the US dollar by the end of this year.
For the second quarter of this year, he expects the ringgit to remain weak as the local currency closely tracks the RMB, with China being Malaysia’s biggest trading partner.
“As long as the RMB is weakening, it is quite difficult for the ringgit to strengthen unless Bank Negara Malaysia (BNM) steps in and supports the currency,” he said.
While the prospect of a general election in Malaysia could also weigh on the ringgit, he said the currency market had largely priced in such political noise and the national poll could only create “very short-term” volatility. .
“So you can see, [as] The BNM only used about $8.5 billion to stabilize the ringgit, they have enough ammunition to stabilize the ringgit because at the height of 2018-2019 they used about $24 billion, so it remains a buffer,” he said.
“Malaysian businesses today are increasingly going offline [from] political, that’s why we see that the business climate is positive, FDI (foreign direct investment) is coming, all this shows that there is a dissociation between politics and opportunities to do business”, he said. -he adds.
Furthermore, he said high crude oil and crude palm oil prices also act as a buffer against the depreciation of the ringgit.
The ringgit has weakened 5.3% against the US dollar since the start of the year. And the local currency strengthened 0.1% against the greenback at 4.3865 at the time of writing.