POTENTIAL BOOST

CURRENCY specialist ForexTime has forecast that oil prices may exceed US$70 (RM296) per barrel next year. This means the government could generate more revenue than the RM240 billion projected in the 2018 Budget.

KUALA LUMPUR: The ringgit is likely to hit RM4 to the US dollar next year, strengthening the most among regional peers, says Jameel Ahmad, vice-president of corporate development and market research at ForexTime (FXTM).

The ringgit is expected to appreciate by 2.22 per cent by the third quarter of next year, followed by rupiah and Singapore dollar at 1.38 per cent and 1.1 per cent, respectively.

On the possible catalyst for the appreciation despite being the fifth best-performing currency this year, Jameel said the ringgit is still being oversold.

“I personally believe the ringgit is still very much oversold and should probably be closer to RM4 compared with the current RM4.23. If the dollar had not recently bounced higher after hitting its lowest level in over 25 years, the ringgit would have been trading around RM4.10, potentially even lower.

“With the increased US interest rate policy already priced into the market, it is no longer a heavy concern for the ringgit. Its next direction now rests on (the United States President) Donald Trump’s tax policies and the potential who he might nominate as the next Federal Reserve chair.”

On the possible reason the ringgit was among the worst-hit currencies, Jameel said it could be due to the bad news factored into the currency valuation at the time.

“It was probably because investors were pricing in a lot of bad news at the time. Among the bad news were the US interest rate policy, crude oil price and the domestic economy slowing down. When all of the reasons come together, the currency suffers,” he said.

FXTM also forecasts the Malaysian economy to grow at 5.5 per cent this year.

“The 5.5 per cent was based on the economic data that has been consistently above expectations, which points to the higher bias to the initial forecast of five per cent.

He added that a potential combeack in the oil prices would be beneficial to growth prospects.

Inflation will likely moderate next year and is not currently seen as a threat for the local economy, he said. Zarina Zakariah