Could the ringgit revert to its long-term average of RM3.7875?

Question

Accepted Answer

The Ringgit Shows Potential to Revert to its Long-Term Average of RM3.7875

The ringgit is anticipated to strengthen further against the US dollar, with analysts suggesting a potential reversion to its long-term average. This projection is supported by sustained demand for the local currency, healthy economic fundamentals, and anticipated shifts in global monetary policy. The currency has already demonstrated gains, strengthening against the US dollar from 4.3720/3775 to 4.3185/3225 on a week-on-week basis as of August 29, 2024.
Factors Supporting Ringgit Appreciation

Several key factors are contributing to the optimistic outlook for the ringgit. Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, highlighted that the ringgit may breach its immediate support level of RM4.3030. He further noted that the historical average of the US dollar/ringgit since the currency peg was removed on July 21, 2005, stood at RM3.7875. Given this historical context, there is a significant likelihood of the ringgit appreciating further as it moves towards its long-term mean.
Impact of US Federal Reserve Policy and Global Investment Flows

AmBank Group indicated that the ringgit's strengthening trend is likely to continue, with previous weeks' gains being sustained due to robust fundamentals and the US Federal Reserve's commencement of its interest rate cutting cycle. This policy shift by the Federal Reserve, particularly if it occurs without triggering a US recession, is expected to boost investor appetite for emerging market assets, including those denominated in ringgit. Furthermore, Malaysia's healthy sovereign credit rating is anticipated to attract portfolio inflows, providing additional support for the ringgit.
Domestic Monetary Policy and Equity Market Performance

The stability of Malaysia's domestic monetary policy is also a contributing factor. Bank Negara Malaysia is expected to maintain its overnight policy rate (OPR) throughout 2024 and potentially into the first half of 2025. This would lead to a narrowing of the interest rate differential between the OPR and the US Federal Funds Rate, making ringgit-denominated assets more attractive. This environment, coupled with positive foreign investment in Malaysian equities, which saw net foreign buying reach RM2.53 billion on a year-to-date basis up to August 29, 2024, reinforces the upward momentum for the ringgit.

Reading history

Hide →

This history is cleared when the page is closed.

Could the ringgit revert to its long-term average of RM3.7875?

Loading

Was this article helpful?

Helpful

Not helpful

Report an issue

1

0

0

Share with friends