MALAYSIA’S stellar third-quarter gross domestic product (GDP) growth has led foreign exchange (forex) analysts to revise their outlook for the ringgit versus the US dollar.
The economy grew at a faster pace of 6.2 per cent in the third quarter compared with 4.3 per cent in the same quarter last year.
For Malayan Banking Bhd (Maybank FX), the ringgit remains about 10 per cent undervalued. It has revised its forecasts for the next five quarters, saying the ringgit’s outlook was underpinned by a growing list of positive factors.
“The current external environment of monetary policy continuity in the United States, still subdued inflationary pressures in the US and synchronised global economic recovery should continue to bode well for robust Asian exports recovery and benefit countries that are trade-dependent,” said Maybank FX in its weekly outlook report.
Domestic resilience, supported by investor sentiment (with the general election to be held next year and positive developments to deepen financial markets), and room for commodity prices to pick up should also strengthen the ringgit.
The local currency is undervalued based on Maybank FX’s fair value model of 3.80 levels. The model takes into account the relative differentials in interest rates, inflation, current account and a reflation proxy variable.
“We believe there is more room for this laggard to play catch-up,” it added.
Maybank FX expects the ringgit to trade at 4.17 by year-end from its previous 4.25 forecast and appreciate further to 4.02 by the end of next year.
AmBank FX also expects the ringgit to continue to trade on bullish bias in the near term.
It was expected to trade between its support of 4.1500 and resistance of 4.1775 amid positive sentiment following the better-than-expected third-quarter results, said the firm.
Meanwhile, Affin Hwang Investment Bank vice-president and retail research head Datuk Dr Nazri Khan Adam Khan was quoted by Bernama as saying that the ringgit might hover around 4.10 against the greenback this week due to positive domestic factors.
On Friday, the ringgit opened at 4.1725 versus the US dollar before settling at 4.1640 from Thursday’s close of 4.1760.
Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim had said the ringgit was now reflective of real economic activities in the financial market and was not speculative.
The ringgit volatility has declined and is one of the best-performing currencies in the region for two consecutive quarters following the central bank’s measures.