KUALA LUMPUR (Oct 31): The ringgit could appreciate to between 4.00 and 4.10 against the US dollar by the end of this year on clearer policies from Budget 2019, says Affin Hwang Capital Research.

"Our base case is that the dollar will stablise against most major currencies this year if there is a rate hike in December, which would be in line with market expectations," said its chief economist Alan Tan.

Speaking in a media briefing today, Tan said the upcoming budget is likely to provide more clarity for investors and is likely to be "mildly expansionary", despite the need for more austerity and hints at new taxes to be introduced.

This is because a balance will have to be struck between prioritising economic growth, which is necessary to grow revenue via direct taxes, and maintaining fiscal prudence, he said.

Tan opined that the government could reset their fiscal deficit target to between 3.5% and 3.7% this year.

However, this higher deficit is likely to be temporary as the government has indicated that it is still committed to fiscal consolidation in the long term, he said.

As such, Malaysia's sovereign ratings should remain stable, preventing any significant increase in capital outflows, Tan added.