‘Ringgit to hit RM4.10 versus greenback by year-end’

Research houses see local currency rising to RM4.10 against US dollar by year-end

www.nst.com.my/business

THE ringgit is on a steady appreciating bias thanks to its strong economic fundamentals, with research houses now looking at the currency trading at up to RM4.10 versus the greenback by year-end.

This optimism followed ringgit’s sharp rebound last week, which has analysts viewing the currency as a laggard playing catch-up with regional peers.

AmBank Group chief economist Anthony Dass remained “overweight” on the ringgit, putting its fair value at around RM3.95 against the US dollar.

“The better-than-expected gross domestic product (GDP) growth for the first and second quarters, the healthy inflow of around RM10.7 billion into the equity market, ease of inflationary pressures as well as improved onshore sentiments on the ringgit show more room to strengthen,” Dass told NST Business yesterday.

Stability was gradually returning for the currency, said BIMB economist Imran Nurginias Ibrahim.

“We now see ringgit’s appreciation bias to be sustained by a confluence of domestic and external factors.”

External reserves continued to grow, as reflected by positive contribution from trade flows via repatriation of earnings from a robust export growth.

Although the capital flow trend is more subdued now, external reserves continued to grow, as reflected by positive contribution from trade flows via repatriation of exports earnings.

The ringgit, which traded at 4.1953 yesterday morning, was last traded at 4.1960 versus Friday’s close of 4.1955.

Hong Leong Investment Bank (HLIB) expects the bias to be helped by both domestic and external factors.

Improving global economic growth and monetary policy will continue to exert weakness in the US dollar while firmer oil prices will boost the ringgit.

HLIB expects the ringgit to begin trading at RM3.90-RM4.10 next year on downside risks like an outbreak of war or the United States Federal Reserve sticking to its rate hike plan.

Meanwhile, Maybank Investment Bank Bhd expects the ringgit to drift to the 4.10 level by end of next year.

“Our forecast was for ringgit to be range-bound versus the US dollar in 4.25-4.30 band up to mid-2018 amid expectations of US monetary policy normalisation and balance sheet reduction being added to Fed fund rate hikes,” said Maybank IB chief economist Suhaimi Ilias.

The ringgit may also be playing catch up with other regional currencies that have appreciated more versus the dollar, especially the yen, yuan and Singapore dollar.

Standard Chartered Bank Asean economist Edward Lee said the ringgit’s attractive valuations, strong growth, relatively light foreign positioning, and improved sentiment and liquidity would support further strength.