Will the ringgit strengthen to 4.05 against the US dollar by year-end?

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Maybank Investment Bank Projects Ringgit to Reach 4.05 Against US Dollar by End-2023

Maybank Investment Bank Bhd (Maybank IB) forecasts the Malaysian ringgit to strengthen to 4.05 against the US dollar by the close of 2023. This projection is based on the dissipation of previous concerns regarding US Federal Reserve rate hikes and political uncertainty, which had previously dampened sentiment towards the local currency. While a decline in commodity prices from their 2022 peaks might exert some pressure, the impact is expected to be mitigated by a stable trade balance due to China's reopening and the ringgit's current valuation in real effective exchange rate (REER) terms.
Ringgit Forecasted for Sustained Strengthening

Saktiandi Supaat, Head of Foreign Exchange Research and Strategy at Maybank IB, indicated that the ringgit is expected to strengthen in a sustained manner. The initial forecast for the end of the first quarter of 2023 was 4.4 against the US dollar, with subsequent improvements anticipated to 4.25 by the second quarter and 4.15 by the third quarter, culminating in the year-end target of 4.05.
China's Reopening to Bolster Regional Currencies

The reopening of China's international borders is projected to provide a significant boost to Southeast Asian currencies, including the ringgit, particularly in the trade and tourism sectors. Trends in trade balances and exports to China suggest that the ringgit, along with the Vietnamese dong and Indonesian rupiah, could exhibit resilient performance. The return of Chinese tourists is also anticipated to be a considerable positive factor for the Thai baht in 2023.
Diminishing US Dollar Strength Expected

The strength of the US dollar, which was a prominent feature in 2022 due to a series of interest rate hikes, is expected to wane. The currency is likely to experience choppy trading in the first half of 2023. By the second half of the year, several factors are expected to weigh on the greenback, including Europe's recovery from recession, China's full exit from pandemic restrictions, a potential peak in US interest rates, moderating inflation, and further monetary tightening by the Bank of Japan. Consequently, the US dollar is not anticipated to be as strong as it was in the previous year.

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Will the ringgit strengthen to 4.05 against the US dollar by year-end?

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