RBS sees potential in ringgit

KUALA LUMPUR: The Royal Bank of Scotland plc (RBS) sees structural bullishness in the ringgit and picks it as one of three currencies in its Asian basket.

This is based on two factors – the country’s stable monetary policy and the ringgit’s low correlation to the euro, making it more resilient to a global risk sell-off. Looking ahead into the second quarter of 2012, RBS’ forex forecast is RM3.04 to the US dollar.

RBS head of emerging markets FX Asia managing director Stuart Oakley said that what was trumping out other negative factors in the market was liquidity.

“Currencies that do well are those which their countries have a current account surplus and a capital account surplus. As a currency trader though, I also like currencies which have minimal policy interference from central banks and governments, and those with good government fiscal health,” said Oakley.

Based on the global emerging markets forex medium-term fundamentals, RBS estimates that Asian currencies rank among the cheapest.

On RBS’ forex long-term composite score with an inverse relationship between the score and the price, the Mexican peso is the least expensive, followed by the new Taiwan dollar, yuan, won and ringgit.

“We believe that the ringgit is guided by a steady policy handle,” said Sanjay Mathur, RBS’S chief economicst for Asia ex-japan in a statement.