Kenanga expects the ringgit to reach RM4.42 by year end
Published on: Tuesday, June 11, 2024
By: Bernama
The ringgit rebounded in May, becoming one of the best-performing Asean currencies as the US Dollar Index depreciated.
PETALING JAYA: The ringgit has a strong potential to appreciate to the RM4.42 level against the US dollar by year end, said Kenanga Research.
The research firm said although the latest US nonfarm payroll figures surpassed expectations, thus delaying rate cut expectations until November, it observes persistent weaknesses in the US economy.
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It said this includes prolonged job searches, cost-cutting layoffs by firms, and the looming threat of financial strain due to mounting credit card debt and increased mortgage bills.
“This builds the case for the US Federal Reserve (Fed) rate cut in September, combined with Malaysia’s solid fundamentals, the ringgit is set to appreciate.
“The government’s efforts to repatriate foreign income and its commitment to fiscal consolidation may also help strengthen the local note,” it said in a statement.
Kenanga noted that the ringgit rebounded in May, becoming one of the best-performing Asean currencies as the US Dollar Index (DXY) depreciated.
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“This depreciation was driven by a lack of hawkish conviction from the Fed, a softer US jobs report, a slowdown in the core consumer price index and weak retail sales,” it said.
Kenanga said the prospect of policy divergence between the Fed and the Group of Ten (G10) central banks also exerted pressure on the US dollar.
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“Additionally, the ringgit was bolstered by Bank Negara Malaysia’s (BNM) decision to maintain the policy rate and robust domestic macroeconomic readings,” it said.
It noted that most Asean currencies also strengthened against the US dollar.
“The Singapore dollar and Thai Baht each appreciated by 0.4%, while the Indonesian rupiah saw a modest gain of 0.1%,” it said.
Meanwhile, it said inflation rates are expected to remain stable, averaging around 2.7% in 2024.
“Our inflation forecast has already taken into account the recently announced diesel subsidy rationalisation and the potential floating of RON95 in the fourth quarter of 2024.
“Coupled with our optimistic growth forecast of 4.5%-5%, BNM is expected to keep the overnight policy rate unchanged at 3%, potentially until the end of 2025,” said Kenanga.
The ringgit opened at 4.7200/4.7250 this morning.
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