KUALA LUMPUR: THE ringgit is expected to continue its recovery in the coming weeks on the back of the country’s healthy economic performance.
This is also because the net inflow of funds in the equity market has been positive for the past 21 weeks while the US dollar has weakened against other currencies.
Affin Hwang Investment Bank said foreign investors were parking their money in the Malaysian capital market for better yields.
“We see there is an influx of foreign money into the Malaysian market as it is perceived as safe haven,” said Affin Hwang Investment Bank vice-president and retail research head Datuk Dr Nazri Khan Adam Khan.
He said the ringgit’s performance would be determined by the recovery of oil and commodity prices.
“The ringgit has been undervalued for a while. This is the right time for it to pick up. For the last three month, the ringgit has rebounded strongly compared with other regional currencies.”
Nazri said the economy was in good shape.
He said for example, the government was spending more on infrastructure projects, such as the mass rapid transit and light rail transit, which made Malaysia attractive to global investors.
MIDF Amanah Investment Bank Bhd chief economist Dr Kamaruddin Mohd Nor said the country had microeconomic stability with improved external trade, which was suitable for investors.
“Based on the microeconomic indicator, our country is a good destination for investments and attracts confidence in the market,” he told NST Business yesterday.
“We are positive on the ringgit’s strength and see a push in the momentum as the US dollar weakens against other currencies.”
Kamaruddin foresees the ringgit will continue to strengthen and may even reach the RM4.10 level.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the United States Federal Reserve (Fed) was expected to normalise its rates gradually.
“This is good for growth as it will allow ample time and space for businesses and households to get used to the new environment.”
He said the inflation rate in the US and other advanced economies was still below target and global monetary policies were likely to remain accommodative.
“Therefore, the external sector appears to be supportive of Malaysia’s exports and inflows of capital from abroad.
“This would be beneficial for Malaysia’s overall growth. Nonetheless, uncertainties about Brexit (Britain voting to leave the European Union), US President Donald Trump’s policies and oil prices would intermittently cause anxiety to the markets and this could affect the exchange rate volatility,” he said.
Meanwhile, Inter-Pacific Securities research head Pong Teng Siew said the ringgit was under-valued compared with most other currencies.
“The ringgit is unable to strengthen rapidly because of the poor liquidity in onshore market. The ringgit is going through a cycle of weakening and strengthening. There are people who trade in the currency market to make profit,” he added.
He said the research firm’s fair value of the ringgit was around RM4.15 against the US dollar.
Rakuten Trade Sdn Bhd research head Kenny Yee said he believed that the inclusion of the yuan as a reserve currency would be positive on regional currencies.
“Hence, we expect most to strengthen against the US dollar, notwithstanding the rate revision by the Fed, going forward,” he said.