RINGGIT HITS 3.8853 AGAINST U.S. DOLLAR
KUALA LUMPUR: The ringgit hit 3.8853 against the US dollar in late trading yesterday, its strongest position since April 2016, after Bank Negara Malaysia raised the Overnight Policy Rate (OPR) for the first time in 3½ years.
Maybank Investment Bank Bhd (Maybank IB) and Standard Chartered Bank believe the ringgit is still undervalued despite an upswing in recent weeks.
Standard Chartered global research macro strategist Mayank Mishra said the bank was positive on the ringgit’s outlook with an expectation to stay broadly at the 3.90 level against the greenback.
“We think the ringgit is an undervalued currency in Asia’s emerging market and, therefore, extremely attractive from a valuation standpoint,” said Mishra at a briefing yesterday.
Maybank IB chief economist Suhaimi Ilias said the ringgit had not truly recovered from the hit it took between 2013 and 2016.
“The ringgit lost 30 to 35 per cent in value after enduring prolonged losses between 2013 and 2016, mostly on the back of falling oil prices and external factor.
“Though we are projecting the ringgit to end at RM3.90 against the US dollar by year-end, we still believe the ringgit is undervalued, given the supportive fundamentals such as firmer crude oil prices, external reserves rebuilding, sustained trade and current account surpluses and the like.”
He said Maybank FX Research’s fair value estimate for the ringgit against the US dollar was RM3.70.
“There are two big external factors this year which will impact the ringgit. The first is the OPR hike, and the other is the general election. The combination of the two events will exert some volatility and selling pressure in the interim.”
Suhaimi backed the government’s decision not to peg the ringgit to the US dollar.
“Not pegging the ringgit is the right way to go as this decision reflects our sound market policies.
“At the end of the day, there will always be noises, but what we have known now is that the market will always look beyond the noises and that’s already reflected in our strengthening ringgit and growing gross domestic product (GDP),” he said.
Maybank IB expects a 5.3 per cent GDP growth this year, driven by continued growth in consumption and investment, while exports and imports will expand further on sustained global momentum.