KUALA LUMPUR: The ringgit is poised to begin 2019 as one of the best performing currencies in Asia, with a few analysts forecasting the currency to breach below RM4 level at some point throughout.
This is despite lower risk appetite towards the regional currencies on the back of tighter global liquidity conditions following the recent United States Federal Reserve’s rate hike.
Analysts have forecast further hikes next year. The projection however was reduced to two times from three in line with slower growth and inflation expected in 2019.
Although the regional currencies would continue to be impacted by external fronts, the ringgit is expected to show its resilience by outperforming its Asian peers, analysts said.
The Malaysian currency is expected to rank fourth below Korean won, Hong Kong dollar and Singapore dollar early next year, Bloomberg’s foreign exchange scorecard shows.
It is then expected to gap lower and strengthen against the US dollar throughout the year, according to the latest Bloomberg’s survey of analysts.
It reveals that Canadian Imperial Bank of Commerce and Krung Thai Bank PLC forecast the ringgit to hit below RM4 level against the greenback next year.
Strategists Skandinaviska Enskilda Banken, Eugenia Victorino and Melody Jiang, in a recent report, said the ringgit had managed to overcome external problems better than its regional counterparts in Asia this year, mainly due to Malaysia’s strong current account surplus.
MIDF Research said the continous current account surplus would lend support to strengthen the ringgit next year.
Today, the ringgit ended stronger against the US dollar as oil price rebounded early morning. At 6pm, the ringgit traded at RM4.1695 versus the greenback, higher than Wednesday’s close of RM4.1772.
“Buying sentiment towards the ringgit brightened in the morning amid rebounding oil prices and apparent return of risk appetite,” FXTM research analyst Lukman Otunuga said.
Reports of Washington reassuring investors that the Federal Reserve chairman Jerome Powell would not be fired coupled with optimism over the United States restarting trade talks with China in early 2019 boosted investor confidence, he added.
On the near term outlook, Lukman with the positive developments offering investors a short-term distraction away from global growth fears, the ringgit and many other emerging market currencies have the potential to edge higher.
However, it must be kept in mind that global sentiment remains quite fragile with geopolitical risk factors on the mind of many market players, he told NST Business.
“Technical traders will continue to closely observe how the ringgit behaves around the 4.1750 regions against the greenback. Sustained weakness below this point is seen opening a path back towards 4.1720,” he said.
- New Straits Times