MIDF Believes Ringgit Could Strengthen To RM4.00 By Year End

US dollars strengthened against major currencies last week as the DXY dollar index rose +1%wow to 102.92. When the Fed’s FOMC announced the decision to further hike rate, the DXY index fell to 101.22, the lowest closing since Apr-22. However, the trend reversed and demand for USD picked up, especially when the job market update for Jan-23 came out stronger than market expectations, raising talks about additional rate hikes by the Fed.

Following the increased demand for US dollars, both euro and pound sterling depreciated by -0.7%wow to USD1.080 and -2.6%wow to USD1.206, respectively. Euro’s depreciation was limited by expectations for more rate hikes as the ECB remains hawkish. Pound sterling, on the other hand, seems to be dragged more by concerns over the UK’s economic outlook, with the BOE still focused on keeping inflation in check with another rate hike last week.

Ringgit also weakened. Malaysian ringgit depreciated by -0.3%wow and closed at RM4.259 last Friday, mainly
because the market priced in for more rate hikes by the Fed. Commodity price movement was also a drag to the ringgit’s
exchange rate because Brent crude oil ended at 3-week low of USD79.94pb, or -7.8%wow lower than prior week.
Given the appreciation of the ringgit over the past month, which has been stronger than our earlier prediction, MIDF has
revises its ringgit outlook predicting a sharper strengthening against US dollars towards RM4.00 by year-end.

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