FXTM sees ringgit gaining ground against dollar

KUALA LUMPUR: The ringgit is likely to range between RM4.15 and RM4.30 against the greenback at the end of 2017 and further appreciate to RM4 in 2018 in anticipation of the rebound in crude oil prices as well as the lack of progress in the execution of Trump’s policies, according to FXTM.
The ringgit traded at 4.2310 against US dollar at 5pm today. The ringgit, which appeared as the fifth strongest currency in the region, has appreciated about 6% against the US dollar year-to-date.
FXTM global head of currency strategy and market research Jameel Ahmad said in a media briefing today that if it is not for the recent recovery of the US dollar, the ringgit would have traded at RM4.10 against the greenback.
At the current level, he said the ringgit is still undervalued, considering the positive economic developments in Malaysia.
As US President Donald Trump’s campaign promises such as tax reforms, protectionism and others have yet to fully materialise, he believes the ringgit is unlikely to be impacted further.
“For as long as this is delayed, it will be positive for the ringgit and regional currencies,” he explained.
Jameel also highlighted that these policies and promises to boost growth, will in fact require low interest rates in contrary to the US Fed’s indication of further rate hikes.
On top of that, he said the announcement on the next Fed chairperson who will be succeeding Janet Yellen, expected today, will also play a role.
This boils down to the new Fed chairs dovish or hawkish approach on rate hikes.
“If Trump does nominate somebody who is much more cautious than Yellen, much more anxious and less enthusiastic of raising interest rates, the financial markets and all the currencies that are trading against the US dollar including the Malaysian ringgit will find an opportunity to strengthen,” he added.
With other central banks also mulling interest rate hikes, it takes away the pull factor to buy the dollar, as the Fed is no longer the only ones talking about rate hikes.
Jameel said other external developments that could weigh on the ringgit are Brexit, weakened pounds and interest rate hikes by the Bank of England.
On the domestic front, he does not foresee a change to Bank Negara Malaysia’s Overnight Policy Rate (OPR) of 3% in the near-term, due to favourable economic conditions and growth recorded this year. The local economy is expected to moderate to about 5% next year.
Jameel is optimistic on the crude oil prices, which are seen rebounding to about US$65 per barrel and even US$70 if conditions are favourable, which will spell well for the ringgit.
The rebound will be supported by production cuts by Opec and outcomes from meetings between leaders of Opec and non-Opec countries such as King Salman and Vladimir Putin.