Economists: Ringgit to hover around 4.20 to 4.30 level in 2023

THE bullish streak in the ringgit is expected to continue in 2023 and hover around the 4.20 to 4.30 level next year, economists chimed in to say.

They added that the worst may be over for the ringgit as the biggest hurdle that the ringgit had to surmount last year was ‘political uncertainty’ which had been addressed following the general election and the new government in place.

Sunway Business School professor Dr. Yeah Kim Leng told FocusM that the ringgit is expected to retrace its value and move towards its fundamental values which should be between the 4.20 to 4.30 level at least.

“The further direction of the US economy, its ability to avert a hard landing, and the tapering of interest rates there will have a bearing on the ringgit.”

Yeah added that if the recession is imminent and the US is up for a hard landing, this will weaken the USD but strengthen the ringgit. “If the US decides to raise interest rates based on rising inflation, then this would have an impact on the US dollar vis-a-vis the ringgit,” he said.

Another important factor, Yeah said was the easing of COVID-19 restrictions in China and the uptake in its economic activity there. This will also have a positive bearing on the ringgit, as Malaysia is one of the biggest exporters to China, and the greater tourist arrivals into the country are likely to bode well for the Malaysian economy and would impact the ringgit positively.

Moreover, Yeah said that China’s loosening of COVID-19 restrictions may also lead to higher demand for commodities, which may spur interest in commodity currencies and trade partners, including Malaysia.

On domestic conditions, Yeah said that it expects a 1—2%  rate hike by Bank Negara Malaysia next year, as this would depend on the local demand-pull conditions.

He also noted that the ringgit would be able to retrace most of its value going forward and expected it to hover around the 4.20 to 4.30 level.

Another analyst in the stockbroking house told FocusM that increasing strength in the ringgit was only to be expected as the reasons for the weakening were reversed.

The main reason for the ringgit to languish for the whole of last year was ‘political uncertainty’ and with that out of the way, it would be able to move towards its fundamental value, according to the analyst.

“Going forward, the many structural reforms that are now being initiated by the new government, such as targeted subsidies and fiscal consolidation, are likely to bolster investor confidence and shore up the ringgit’s strength.”

Furthemore, the ringgit fell to a historic low of RM4.7465 against the USD on Nov 4, 2022, as inflation started to cut a swathe across the globe and at home.

This was its worst level since the currency recorded RM4.7125 on Jan 9, 1998, as a result of the Asian financial crisis. On Thursday (Dec 29), the ringgit was at 4.4150/4200 against the USD. — Jan 1, 2023


Main photo credit: Bloomberg

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