Ringgit to remain volatile awaiting Fed move

Analysts believe the ringgit looks constructive as the reopening of the economy would mean better economic growth in 2022

by NUR HANANI AZMAN / Pic by MUHD AMIN NAHARUL

THE ringgit is set to experience some volatility in the near term as concerns of in ation lead analysts and markets to perceive the US Federal Reserve (Fed) could move to raise its benchmark interest rate sooner.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said this expectation has bolstered the US dollar recently at the expense of the local unit.

“Beyond that, we believe the ringgit looks constructive as the reopening of the economy would mean better economic growth in 2022.

“Should the economic recovery become more sustainable, it would increase the odds of a higher Overnight Policy Rate at some point in the future. But for now, the Fed will be in focus to determine the value of the ringgit,” he told The Malaysian Reserve (TMR).

He said commodity prices such as the Brent crude is also an important factor given its close association with the government’s revenue and the oil and gas sector.

Rakuten Trade Sdn Bhd VP of equity research Thong Pak Leng said foreign inflow into the local capital market will help to strengthen the local unit.

“Our forecast for next six months is for the ringgit/US dollar to range between 4.05-4.15 while the FTSE Bursa Malaysia KLCI (FBM KLCI) will trend between 1,530 and 1,550 points for the week,” he told TMR.

Mohd Afzanizam said improving GDP growth prospects would result in better earnings growth for corporate Malaysia.

“While Cukai Makmur is expected to negatively impact the key sectors such as manufacturing, banks and utilities, it will be just a one-time affair. Given that, companies’ earnings would rebound beyond the financial year 2022.

“We already have seen foreign investors have been accumulating the local shares, suggesting that there are values that can be offered by our listed companies,” he reckoned.

AmBank Group chief economist Anthony Dass expects the ringgit to find support at the 4.15 level against the greenback while the resistance is pinned at 4.16 and 4.17.

Moving forward, he expects the domestic economy will be reignited by stronger external trade especially through the semiconductor and petroleum products demand an upswing, elevated commodity prices and better pandemic and vaccine management which should lead to the easing of pandemic restrictions across the world.

“On that note, we have revised our full-year 2021 GDP growth projection to 3.5% year-on-year assuming the fourth quarter of 2021 GDP will grow by 3.4%,” he wrote in a research note recently.

The ringgit closed at 4.1663 against the greenback yesterday while the benchmark FBM KLCI rose marginally to 1,522.89 points.