StanChart: Ringgit to hit 3.90 against greenback by year-end
StanChart has bearish bias on greenback over the next 12 months
THE ringgit will likely strengthen to 3.90 against the US dollar by the end of the year, according to Standard Chartered (StanChart).
Its head investment strategist Manpreet Gill said the forecast was on the back of the its view that the US dollar would continue to weaken over the next 12 months.
“We believe the US dollar may continue to strengthen in near term, but we have a bearish bias over the next 12 months,” said Manpreet at the Standard Chartered H2 Global Market Outlook, here, yesterday.
“We believe the disappointing Euro area economic data is unlikely to extend into the second half, which means the market’s focus is likely to return to when the European Central Bank (ECB) hikes interest rates. This will ultimately put upward pressure on the euro and downward pressure on the US dollar.
“The United States’ twin budget and trade deficits are another reason for the US dollar to weaken,” he added.
The US dollar had fallen by about 13 per cent since the beginning of last year, but had rebounded on the back of a reduction of growth expectations in the Euro area. This has also led the ECB to push back expectations for Euro area interest rate hikes.
Manpreet said within the current global environment that was on the uptrend, it would be “unusual” for Malaysia not to do well.
“The Malaysian story within the global context is interesting and we believe the US dollar story is the single most important factor because as the US dollar weakened, the ringgit will strengthen,” he said.
“On top of that, Malaysia has a lot of foreign holdings in the bond market. We believe those foreign inflows into the bond market will return because of various factors.
“The first is the weakening US dollar and another is Malaysia government bonds typically gives four per cent yields, which is higher than European bonds,” he said.