Ringgit on the right path

PETALING JAYA: Foreign exchange strategists and economists are cautiously optimistic that the ringgit will gradually strengthen against the US dollar by year-end amid potential currency fluctuations in the global forex markets.

The recent FTSE Russell’s move to retain Malaysia’s membership in the FTSE World Government Bond Index is positive and could be beneficial for fund flows into ringgit bond assets over the longer term, he said. Bouts of softness in ringgit cannot be ruled out, he said especially if domestic risk factors weigh in. But, the base case remains for a gradual strengthening in the ringgit by year-end, amid potential currency fluctuations in the global forex markets, ’ he said.

“Risks to our currency view include the possibility of renewed Covid-19 waves and what continues to be a tightening policy bias in China, ” he said.Juwai IQI global chief economist Shan Saeed expects the local currency to maintain its stability despite financial fragilities in the exogenous environment.“However, I am maintaining our stance for the ringgit to trade at 3.67 to 4.10 against the greenback in the current year.

“While the continued strong demand of our exports helps the ringgit, capital flows are still a dominant driver of the ringgit. This expectation along with financial volatility and higher rise in bond yields could reset investors’ firmer view about the US dollar index and hence, a softer ringgit, he said.OCBC Bank economist Terence Wu said its current year-end forecast for the US dollar against the ringgit is at 4.186, which is higher than current levels.

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