Improving recoveries across Asia will boost ringgit versus US dollar
KUALA LUMPUR: The improving economic recoveries across Asian countries particularly in China are expected to further drive Asian currencies’ strength including the Malaysian ringgit against the US dollar, UOB Malaysia said.
It believes the current global landscape (global reflation trade, prolonged low interest rates, and ongoing fiscal support) will remain supportive of broad dollar weakness through the year.
“We reiterate our local note trading versus the greenback forecast of 4.00 by mid-2021 and 3.95 by year-end,” said its senior economist Julia Goh in a statement.
She said Malaysia continued to record higher foreign portfolio inflows at the start of 2021 mainly into domestic bonds.
Overall net foreign inflows totalled RM2.8 billion in January (December: RM3 billion) with bond inflows of RM3.7 billion (Dec: RM3.6 billion) while equities saw net outflow of RM0.8 billion (Dec: minus RM0.6 billion).
“This mirrored the trend of higher portfolio flows entering emerging market bonds.
“Despite domestic challenges, we think Malaysia’s government bonds remain attractive as capital flows into emerging markets remain strong given low global interest rates and high market liquidity that boosts positive carry-trades,” Goh added.
She recommended looking out for the release of Malaysia’s fourth quarter and 2020 gross domestic product on Feb 11; Bank Negara Monetary policy meeting (March 4), release of BNM Annual Report 2020 (end-Mar) and FTSE Russell’s March World Government Bond Index (WGBI) review.
UOB noted that Malaysia will also start the first phase of its vaccine programme by end-February (for frontliners), second phase in April (high-risk groups), and the third phase in May (aged 18 and above). — Bernama