KUALA LUMPUR (Jan 26): The ringgit appreciated to its strongest point against the US dollar so far today at 3.8740 after Bank Negara Malaysia increased the overnight policy rate (OPR) by 25 basis points to 3.25%.

At 1:07pm, the ringgit was traded at 3.8750 versus the US dollar. The exchange rate so far today was between 3.8740 and 3.8948.

"We believe there is room for BNM to increase the OPR by another 25 bps, probably in the second half of the year. That would bring the OPR to 3.50%, if it is materialised. This is especially if there is an increase in foreign capital outflows, following rising uncertainties in global developments such as the relative pace and timing of future monetary policy tightening by the US Federal Reserve.

"With two OPR hikes in the pipeline this year, as well as strong economic fundamentals, including improving commodity prices, stronger foreign reserves and stable current account surplus, we are tweaking our MYR/USD forecast to average 4.00 in 2018. Our previous projection was 4.10," TA Securities Holdings Bhd wrote in a note today.

Yesterday, Bank Negara said in its monetary policy statement that the strengthening ringgit reflects Malaysia's economic fundamentals. "The domestic financial markets have been resilient. The ringgit has strengthened to better reflect the economic fundamentals. Banking system liquidity remains sufficient with financial institutions continuing to operate with strong capital and liquidity buffers. The growth of financing to the private sector has been sustained and is supportive of economic activity," Bank Negara said.