KUALA LUMPUR (Xinhua) — Analysts on Monday foresaw the Malaysian ringgit (MYR) weakness will persist in the near term. Maybank Investment Bank Research said in a note that it’s due to concerns that persistently strong United States (US) data and treasury supply could keep US treasury yields elevated.
Also, the research house opined that jitteriness about the Gaza conflict spreading could increase appetite for US dollar (USD) as a safe haven, which in turn would weigh on the exchange rate. “Our Maybank foreign exchange fast-tracking model sees the USD/MYR hitting 4.82 based on current explanatory factors although we do not rule out it moving above that level if the explanatory variables shift significantly,” the research house said.
However, it said its model-fitted values also suggest that the upward pressures based on factors such as interest rate differentials at current levels are not too significant so as to push it much higher beyond 4.80 levels.
Maybank research continues to hold to its forecasts which sees the USD/MYR hitting 4.65 by the end of 2023 as the MYR could get some relief from the USD seasonally coming off towards year-end.
According to the UOB Global Economics and Markets Research, MYR is weighed down by expectations of higher-for-longer US Fed rates and demand for safe-haven USD assets.
Given that current conditions remain fluid, it expects the MYR to remain highly volatile and a recovery in the local currency is likely to be delayed further. Its current USD/MYR forecasts are 4.70 by end-2023, 4.55 in the first quarter of 2024 and 4.48 in the second quarter of 2024. “Our current expectations of a subsequent MYR recovery starting the first quarter of 2024 was premised on China’s recovery momentum picking up steam and as Fed rate cut expectations start to weigh on the USD in the same quarter,” it said. RHB Research said in a recent note that it is positive on MYR in 2024, following the announcement of Malaysia Budget 2024.
According to the research house, the budget initiatives will support MYR in 2024 at its range forecast of 4.50 to 4.70 per USD, from an estimated 4.80 per USD at the end of 2023. “Our quantitative analysis via six key variables suggests that MYR will benefit from an improved Malaysia-centric interest rate, trade, and fiscal matrix, while dragged by potentially lower oil prices and higher public debt,” it said.
For the remainder of 2023, RHB research remains negative on the MYR given that the positive carry on the USD will likely widen against the MYR on the back of an expected US Fed fund rates hike to 5.50-5.75 percent by the end of the year, and Malaysia’s exports and current account have shown signs of softening in the fourth quarter of 2023.
