THE Malaysian ringgit has raced ahead of all its Asian peers in the past three months and if market watchers are right, the move is set to gain traction.
The currency – which has climbed nearly 1 per cent since the end of February – is expected to rise to 4.65 per US dollar by year-end from 4.7050 now, according to strategists surveyed by Bloomberg. Rising foreign inflows and income repatriation by state firms are fuelling the optimism.
Analysts are predicting that the ringgit’s rebound from a 26-year low will prove more lasting than a previous attempt as global funds return to Malaysian assets and the export outlook improves. Local stocks are set to receive their first monthly inflow since February while overseas investors snapped up US$233 million of the nation’s bonds in April.
The ringgit’s performance is due to “foreign inflows into domestic equity and bond markets, improved growth prospects and a widening of the current-account surplus”, said Christopher Wong, a strategist at OCBC in Singapore.
Authorities stepped in to revive the currency in recent months by encouraging state-linked firms to repatriate foreign investment income and convert it into ringgit more consistently. The initiative gives “markets the impression that regulators are closely watching MYR FX markets”, Wong said.
Nevertheless, some analysts caution that ringgit investors still face risks from persistent US-China trade tensions and the fallout on the yuan and South-east Asian currencies.
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But for now, optimism is running high. Wong predicts that the ringgit will strengthen to 4.64 by year-end, predicated on a move lower in the US dollar and Treasury yields, as well as a stabilising Chinese economy. BLOOMBERG
