‘Ringgit to hit 4.55 versus US dollar by year-end’
KUALA LUMPUR: The ringgit is expected to strengthen to 4.55 against the US dollar from 4.70 by the end of the year, said BMI Research in a note yesterday.
This improvement could attributed to a relatively solid economic forecast and narrowing interest rate differentials with the United States, it added.
Since the beginning of the year, the ringgit has been broadly declining, reaching a multi-year support level of 4.80 against the US dollar on April 16. Although it has recovered some of its losses, the ringgit is 2.5 per cent lower against the greenback year-to-date.
“However, the exchange rate has remained largely unchanged since our previous update in April. Thus, we retain our forecast of 4.55 against the greenback by end-2024, implying that the ringgit will likely appreciate more substantially in the fourth quarter.”
BMI said the ringgit would strengthen by another 3.3 per cent next year, reaching 4.40 by end2025, bolstered by further policy loosening of up to 200 basis points, by the US Federal Reserve (Fed), which would take the funds rate down to three per cent by December 2025.
The research firm also expects Bank Negara Malaysia to hold the Overnight Policy Rate at three per cent through end-2024. From a growth perspective, Malaysia’s relatively strong real gross domestic product (GDP) growth outlook vis-‡-vis the US will provide a favourable backdrop for the ringgit. “We expect real GDP growth to accelerate from 3.7 per cent in 2023 to 4.4 per cent this year and 4.5 per cent in 2025.
“We expect US GDP growth to slow from 3.6 per cent in 2023 to 2.1 per cent this year and 1.4 per cent in 2025.”
BMI said as a share of GDP, net foreign direct investment (FDI) inflows into Malaysia had consistently surpassed that of regional peers such as the Philippines and Thailand.
In May, Prime Minister Datuk Seri Anwar Ibrahim said he was seeking to attract RM500 billion investments in the initial phase of the National Semiconductor Strategy, particularly in the water fabrication and manufacturing equipment aspects.
Additionally, at the 50th anniversary celebration of China-Malaysia diplomatic ties, Chinese Premier Li Qiang opened the possibility of connecting Malaysia’s East Coast Rail Link to other Chinese-backed railway initiatives in Laos and Thailand.
“While little has been finalised as of June, we expect Malaysia’s FDI to benefit from the improved regional connectivity should these plans come into fruition,” BMI added.