KUALA LUMPUR – The ringgit is expected to be one of the best-performing currencies in the region in 2024, with it ending the year at RM4.40 against the US dollar, said the Affin Group.
Its chief economist Alan Tan Chew Leong said the ringgit would be lifted by the prospect of easing interest rates globally, as well as the country’s strong current account surplus, sound fiscal discipline and lower inflation domestically.
“The ringgit had been weakening in 2023 compared to regional currencies like the Indonesian rupiah, Thailand baht, the Philippine peso and the Japanese yen and Chinese renminbi.
“However, because of the improving economy which will be a lot stronger in 2024, we expect the ringgit and yen to appreciate this year,” he told a media briefing on the bank’s Macro and Market Outlook 2024 presentation here today.
Tan said the ringgit’s appreciation will be market-determined as investor sentiment improves amid the country’s strengthening economic fundamentals with possible favourable assessments by sovereign rating agencies.
The expectation of interest rate cuts by the US Federal Reserve would further support the ringgit, he added.
“Over the last two years, we had seen (widening) regional interest rate differentials, with the US trending higher, therefore the capital outflows back to US-dominated assets.
“Most probably, from the second half of 2024 the US Federal Reserve (Fed) would normalise or cut interest rates, while major central banks in the region hold rates, (so) we will see more capital inflows back to the region.
“That will help spur positive sentiment for the ringgit…we will see a similar trend not only in the ringgit but also in regional currencies,” he said.
Tan expects Bank Negara Malaysia to keep the overnight policy rate unchanged for the rest of this year given a higher-for-longer interest rate environment in the US, with the Fed starting to cut the key rate by 25 basis points in its September meeting, followed by more cuts in November and December, by a total of 50 basis points. – January 9, 2024