FOREIGN BANKS KEEP RINGGIT OUTLOOK
Latest forecasts indicate local currency may not be too volatile
SOME foreign investment banks, which have updated their ringgit forecasts following Bank Negara Malaysia’s Overnight Policy Rate (OPR) cut, have left their views “unchanged” on the local currency’s
outlook in the near term.
This is deemed unattractive to foreign investors and reduces demand for the local currency.
German-based Commerzbank and United States-based Silicon Valley Bank have kept their forecasts for the ringgit against the US dollar at 4.17 and 4.14, respectively, for the second quarter ending June 30.
Dutch investment bank Rabobank kept its forecast at RM4.15 while ING Financial Markets kept its forecast at RM4.07.
The latest forecasts indicate that the currency may not be too volatile and unlikely to go too far off the current spots of RM4.15 and RM4.16 until next month.
On a Friday-to-Friday basis, the ringgit fell to 4.1750/1780 against the US dollar last week from 4.1570/1600 previously.
Bank Negara has also introduced several initiatives to enhance market efficiency, liquidity and accessibility in the bond and foreign exchange markets.
This coincided with news last month that Malaysia could be excluded from the FTSE World Government Bond Index.
As Bank Negara’s initiatives take hold, FXTM market analyst Han Tan expects the ringgit to be supported by economic fundamentals and buffered by an accommodative monetary policy.
MIDF Research, however, is a little pessimistic. It has lowered its year-end target to RM4.10 from RM4 previously.
The firm said the decision of Norway’s sovereign wealth fund to reduce exposure in emerging markets, including Malaysia, may cause a substantial outflow over time, thereby putting pressure on the ringgit.
The possible downgrade of the Malaysian bond market by FTSE Russell would haunt the ringgit until September 19, it added.
Further, Bank Negara’s rate cut is deemed unattractive to foreign investments, reducing the demand for and the relative value of the ringgit, it added.