StanChart Singapore sees ringgit to improve vs US$

KUALA LUMPUR: The ringgit is expected to strengthen against the US dollar, reaching 4.66 by the end of the second quarter of 2024 (2Q), and further improving to 4.58 by the end of 2024 following increased clarity on the United States (US) Federal Reserve’s (Fed) policy easing.

Accordingly, Standard Chartered Bank (Singapore) Ltd (StanChart Singapore) holds a positive medium-term outlook on the ringgit.

“We expect Malaysia’s commodity and electronics trade surpluses to improve, while high foreign currency deposits onshore should provide a positioning boost once markets get clarity on the Fed policy easing,” it said in its global research note.

At the opening bell on Friday, the ringgit stood unchanged at 4.7380/7420 versus the greenback from yesterday’s close of 4.7380/7425.

StanChart Singapore also views Bank Negara Malaysia’s (BNM) active engagements with stakeholders as important moves to support the ringgit.

“BNM is actively engaging with government-linked companies and government-linked investment companies, resident exporters and corporates to encourage repatriation and conversion of foreign investment income and hedging of foreign assets.

“It is also actively monitoring the conversion of export proceeds. We see these as important ringgit-supportive measures,” it said.

Moving forward, StanChart Singapore expects BNM to refrain from raising rates in order to support the ringgit.

“We think the central bank will look past increases in headline inflation driven by administrative changes and subsidy rationalisation.

“We do not expect a shift in monetary policy to address forex weakness, which policymakers do not see as affecting the growth and inflation outlook at present,” it added.

Nonetheless, the bank has pointed out two key risks that could affect the local currency.

It said if Malaysia’s economic growth picks up, resulting in increased pass-through of price increases from administrative changes and subsidy rationalisation to core inflation, that could, in turn, cause BNM to raise the overnight policy rate (OPR).

“Secondly, if the US economy turns out to be more resilient than expected, further delaying Fed rate cuts and unwinding rate-cut expectations, this could, in turn, push US Treasury yields, and consequently lifting Malaysian Government Securities (MGS) yields higher,” it said. – BK