Ringgit to maintain structural stability in 2021

THE ALCHEMY of markets has changed and lower interest rate regime is going to stay globally till 2023. The ringgit has demonstrated resilience and strong structurally stability amid the Covid-19 landscape this year. I would say that Bank Negara Malaysia (BNM) has played its pretty card well and manoeuvred strategically despite the toughest exogenous environment global economy has witnessed in the last 17 months. Full credit goes to BNM for making good monetary policy calls in order to maintain structural stability in ringgit. Currency stability indicates monetary policy levers have worked well for the economy at the macro level. BNM will not increase interest rates in 2021 instead its going to lower the discount rate further in 2021.

Money managers and fund managers globally are off loading their position in the dollar and going long on gold. The US Federal Reserve is no more position to get confidence back in the economy.

The Fed has become irrelevant for global investors. The dollar has lost 5% of its value in July-2020. DXY index is down 13.76% YTD which is making equity and bond investors nervous.

Global monetary reset is coming with many policy makers are urging the world to go back to the gold standards. Gold and silver will be pari passu in the next 3-5 years in the global financial markets. The ringgit has demonstrated strong stability in the last 10 months and has maintained upward movement in a very structured way. The ringgit has appreciated 8.55 % from March 23 when it was trading at 4.44 against USD. It is currently trading at 4.09 against USD as of November 302020.

The dollar is heading for tail end risk and is moving south. The Fed has created two tail end risks – deflation and inflation. BNM has played its cards very prudently as exogenous variables are getting unpredictable, and it has used monetary policy very effectively to

Sources: Tradingeconomics.com / BNM / The Economist / WSJ / FT.com

keep ringgit movement as per the market determined forces. The fair market value of RM/USD for Q4/2020 is 4.00 to 4.15. We at Juwai IQI after reviewing the global markets, currency landscape and getting our strategic market intelligence report and trading

Emerging market currencies like ringitt , rupiah, real and rouble would come back very strongly in the market. Markets at some point have to respect the present tense rather than just look ahead. The ringgit is heading north in the upward direction.