Malaysian Ringgit Hitting 4.1 To USD In Second Half Not Unrealistic, Says Economics Professor

By Zarul Effendi Razali KUALA LUMPUR, June 9 (Bernama) -- Having braced through the worst of the financial storm, expectation that the Malaysian ringgit could hit 4.1 against the US dollar in the second half of this year is not unrealistic, says Professor of Economics at Sunway University Business School, Dr Yeah Kim Leng. He pointed out that market perceptions had certainly improved following a series of measures taken by Malaysia's central bank, Bank Negara Malaysia (BNM) to stabilise the ringgit and foreign sell-off in ringgit bonds. “The return of the foreign investors, although largely hedge funds, and the recent ringgit strengthening suggest that we have sailed through the worst of the financial storm. “The strengthening of the economy together with the surge in exports and firm commodity prices are also expected to provide a boost to the ringgit. Hence, the expectation of the ringgit hitting 4.1 to a dollar is not unrealistic,” he told Bernama on Friday. In fact, a widening current account surplus coupled with a stronger rise in foreign reserves could help realise this target sooner rather than later, he maintained. “This is especially so if Trump’s (US President Donald Trump) promised stimulative policies fail to gain traction and the Federal Reserve signals a more gradual path of interest rate normalisation,” he explained. A recent news report quoted a member of BNM's financial markets committee as saying that the local unit could advance 4.0 per cent as the latest measures by the central bank helped reduce the risks of holding the currency and improved the economy. Foreseeing that the ringgit could reach that 4.1-mark in the coming second half-year, Yeah said its fair value should be between 3.8 and 4.0, when benchmarked against regional and commodity currencies. Meanwhile, MIDF Research Chief Economist, Dr Kamaruddin Mohd Nor said the ringgit’s recent positive performance was attributed to various factors, including the introduction of measures by BNM specifically to enhance liquidity in the bond market, as well as allowing greater hedging flexibility onshore. “Other factors include the improved economic fundamentals, positive sentiment, stable commodities prices, as well as the US dollar weakness seen in recent weeks. With exports poised to continue to be upbeat, the ringgit is expected to further strengthen from the current level,” he said. However, MIDF has maintained its year-end target for the ringgit versus the US dollar at the 4.2-level. -- BERNAMA