HomeMalaysiaAnalysts suggest Ringgit likely to depreciate further

Analysts suggest Ringgit likely to depreciate further


KUALA LUMPUR, 11 August – The ringgit is likely to continue its decline against the greenback next week due to mixed sentiments and falling crude oil prices.

Rakuten Trade Research VP Thong Pak Leng said the local note is not expected to strengthen in the near future amid concerns on inflation and global growth.

He added that this will be coupled with tighter financial conditions, as Bank Negara Malaysia (BNM) is still catching up with the rate hike cycle.

“Rate hike in the US will add some pressure to the ringgit too,” he told The Malaysian Reserve when contacted yesterday.

The ringgit extended its gains to close slightly higher against the US dollar yesterday.

At 6pm, the local currency rose to 4.4545/4.4570 versus the greenback from Tuesday’s close of 4.4548/4.4589.

Meanwhile, the ringgit closed on a mixed note against a basket of major currencies.

It rose against the Singapore dollar to 3.2333/3.2356 from 3.2352/3.2383 and improved versus the British pound to 5.3828/5.3858 from 5.3969/5.4005 previously.

The local note fell versus the Japanese yen to 3.3004/3.3025 from 3.2976/3.3022, but gained against the euro at 4.5547/4.5573 from 4.5610/4.5677 at Tuesday’s closing.

MIDF Research, in a note yesterday, said the ringgit remains undervalued based on the real effective exchange rate and it could appreciate to 4.25 per dollar by the end of 2022.  

“With the US Federal Reserve (Fed) expected to slow down the pace of policy tightening towards the end of the year, we foresee less support for the dollar to strengthen further.

“In other words, movements in the financial market would pose less drag on emerging-market currencies.”

On the other hand, AmBank Research opined that the local note will eventually rebound against the US dollar at year-end when macro fundamentals in Malaysia improve.

The research firm said the rebound will also be underpinned by the inversion of the interest-rate gap between BNM and the Fed, substantial downward pressures on geopolitical conflicts and improving confidence.

AmBank Research noted that the ringgit has fallen sharply against the greenback in 2022, declining by about 6.7% year-to-date to a four-year low of RM4.45.

It said the weakness is due to a number of factors, including the narrowing interest rates, as the Fed’s monetary tightening cycle is far from over.

“Besides, the US economy still looks better than the rest of the world, thus providing additional impetus to the dollar in the near term.” — The Malaysian Reserve


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