PETALING JAYA: The going could soon get tougher for the Malaysian ringgit, with an analyst from CIMB Investment Bank Bhd saying that the Malaysian currency could hit a low of RM4.80 to the US dollar.
This, CIMB Investment analyst Ivy Ng said, was due to the lack of clarity on the new US administration’s policies, The Edge Markets reported.
She added that the ringgit outlook was negative with the currency possibly hitting between RM4.50 and RN4.80 against the USD over the next three to six months.
“Since the election, the US yield curve has steepened to reflect the market’s expectation of an inflationary impact of Trump’s campaign promises.
“This narrowed the premium of emerging market yields over the US and resulted in unwinding of carry trades funded in US dollar. The ringgit has fallen in line with this trend and the weakness was further compounded by the relatively high foreign holdings of Malaysian government bonds.
“Currency volatility could remain in place until clarity on the new US administration’s economic and trade policies are made known. Beyond this however, the decent fundamentals of the ringgit could prevail and the ringgit could recover to US pre-election levels,” Ng was quoted as saying by the financial news portal.
She added that a consequence of the continued decline in the ringgit was Malaysian companies being net beneficiaries as exporters will become more competitive, besides companies having assets abroad gaining from the currency effect. – FMT