MIDF Keeps Ringgit Projection At RM4.43

MIDF said its projection for the ringgit to close the year stronger at RM4.43. The inflow of foreign funds into emerging markets, particularly with the anticipated reduction of the Fed’s FFR, is expected to benefit the ringgit and other regional currencies.

Recent indications of a softer US economic outlook have increased expectations for a Fed rate cut in 2024. The house anticipates an average of around RM4.53 in 2024 (2023: RM4.56) and a trend towards RM4.43 by year-end (end-2023: RM4.59). Additionally, the ringgit will benefit from a revival in external trade activities as Malaysia consistently maintains a trade surplus. On the flip side, several downside risks could limit the chances for ringgit to strengthen. For example, weaker growth in China and the US as well as escalation in the geopolitical tensions could negatively affect Malaysia’s external recovery, and therefore reduce support for ringgit.

Moreover, the extended strength in the US dollar, particularly if the Fed further delays rate cuts due to persistently high inflation or stronger-than-expected US economic growth, will also weaken the ringgit’s appreciation prospect.

It is also maintaining its target for MIDF TWRI to close the year higher at 91.50. Despite the MYR’s slide against the USD, we foresee ringgit’s performance against other currencies in the index mostly will continue to be positive.

The anticipated recovery in Malaysia’s external trade and a brighter economic outlook are set to enhance the ringgit’s performance this year. Apart from the trade recovery, elevated commodity prices (e.g., crude oil, LNG, and crude palm oil) are expected to increase demand for the ringgit. On another note, the ringgit stand to gain against other currencies from the anticipated policy easing by other central banks, in contrast to BNM which is expected to keep OPR unchanged at 3.00% this year. Consequently, its anticipates the MIDF TWRI to reflect a broad appreciation of the ringgit, projecting the index to end the year higher at 91.50 (end-2023: 85.34)

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