RINGGIT REFLECTS POSITIVE GROWTH, SAYS JOHARI
Optimism on back of general election anticipation, rate hike expectation and stabilising oil prices
RINGGIT’S strength is likely to continue in anticipation of the 14th General Election in the coming months, underpinned by market speculation that Bank Negara Malaysia may raise rates in its upcoming Monetary Policy Meeting (MPC) and stabilising oil prices.
Maybank FX Research head Saktiandi Supaat said the research house had revised its US dollar-ringgit forecast lower due to recent positive developments in domestic fundamentals, including shifts in investor sentiment and strong gross domestic product outlook.
Other factors include the widening current account surplus and favourable external environment with synchronous global economic recovery benefiting Asian exports, which are extending into investment recovery this year.
“We believe there is room for the ringgit to extend its gains. In fact, we see there is a correction towards its fundamental value,” he said in a research report.
Saktiandi added that the bearish momentum on the dollar versus ringgit remains intact on monthly, weekly and daily charts.
“In particular, a falling wedge pattern appears to be forming, which is a sign of mild bullish reversal. We caution that rebound could re-visit 4.03 to 4.05 levels.”
The recent decline in the dollar/ringgit since mid-December last year continued this year with the pair falling below 4.00 to 17month low of 3.9 on Monday.
Saktiandi said the ringgit’s positive outlook was derived from domestic factors, including sustained growth pick-up backed by consumption, investment and export.
On external factors, he said the current environment of monetary policy continuity and subdued inflationary pressure in United States as well as synchronous global economic recovery should continue to bode well for robust exports recovery.
He said the extension of crude oil production cut into the end of this year amid steady demand should lend further support to oil prices. Hence, commodity/oillinked currencies like ringgit should benefit.
“We expect further ringgit strength to be frontloaded in early part of this year amid the upcoming General Election and Bank Negara rate hike.
“We expect the ringgit to give up some foreign exchange gains post-elections, in the secondquarter this year, as effects of an election-inspired ringgit gains diminish (hence higher dollar/ringgit forecast in).”