Ringgit

The recent inflow of funds into the country is expected to set the ringgit on an uptrend against the US dollar this year.

Affin Hwang Asset Management Bhd managing director Teng Chee Wai said he is bullish over the ringgit’s performance with the country’s improving economic fundamentals and as Bank Negara Malaysia’s (BNM) reserves continue to rise.

“It will take a while for the ringgit to touch between 4.20 and 4.25. With our trade surplus contributing to the local unit’s appreciation, investor confidence at some point will return and make it more sustainable.”

During his presentation at the Affin Hwang Asset Management Investment Forum 2017 on “What Trump’s Presidency means for Asian and Malaysian Markets? ” here today, he said the ringgit’s movement is still tentative and to reach to the 4.25 level, BNM would first need to replenish money lost over the past few months.

Only then, he said, would BNM allow the ringgit to appreciate – with more inflows coming into the country and the market starting to see earnings follow. “Unless something big happens like an election result, then the ringgit may be impacted.”

In his presentation, Teng said Asia’s markets have been catching up well this year, compared to the time when China was having an economic slowdown and Trump winning the US presidency, which saw the greenback rally.

“Most things are reversing themselves now and we are seeing various asset classes in Asia doing well.”

At a separate session, Deutsche Bank’s Asia FX Research global markets strategist Mallika Sachdeva said the ringgit would not be weakening any further – having gone through its worst performance.

“It will also not strengthen so much this year in needing time to recover, provided trends over the past few weeks continue, and the economic environment is stable.”

The ringgit is expected to stay firm at around the 4.30 level to the US dollar next week, driven by the positive gross domestic product (GDP) growth spillover effect.

The encouraging GDP data for the first quarter 2017 (1Q17) released by BNM yesterday helped strengthen the local unit by 0.18% and the positive effect is expected to be extended.

This is more so when the Malaysian economy is in a recovery mode arising from the stronger performance in exports and domestic capital expenditure.

Malaysia’s economy recorded robust growth of 5.6% in the 1Q17 against 4.1% in the same quarter of 2016, boosted by strong domestic demand and private expenditure. It was the best since 1Q15, which saw the GDP at 5.8%.

When announcing the 1Q17 GDP data, BNM governor Datuk Seri Muhammad Ibrahim said the ringgit showed stability due to measures to develop the domestic financial market, and the trend is now, better reflected in the strength of the ringgit vis-a-vis the strength of the economy.

“As we move forward, the ringgit will further reflect the strength of the Malaysian economy. Continued external uncertainties though might result in higher volatility in the ringgit’s movement.”

Standard Chartered Bank Malaysia, meanwhile said, there is significant room for the ringgit to catch up for further gains – given the scale of portfolio outflows in the past four years.

“While a stronger ringgit might be seen as a signal of confidence in the domestic economy, we think the central bank may aim to rebuild its foreign exchange reserves more determinedly at some point,” it added, in a statement.

For the week just-ended, the ringgit moved between the range of 4.3440 and 4.3140 against the US dollar. On a Friday-to-Friday basis, it traded higher at 4.3180/3230 against the greenback from 4.3440/3470.

The ringgit, however, ended mostly lower against other major currencies.

The local note declined against the Singapore dollar to 3.1056/1114 from 3.0859/0900 and edged down against the yen to 3.8723/8782 from the 3.8213/8246 recorded last week.

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