Ringgit could strengthen further

This article first appeared in The Edge Financial Daily, on January 25, 2018.
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KUALA LUMPUR: The ringgit, which has outperformed most of its peers in 2017 and in the first month of this year so far, is expected to see further strength to its fair value (FV) of between RM3.80 and RM3.90, according to Affin Hwang Asset Management Bhd managing director Teng Chee Wei.

Yesterday, the ringgit climbed to 3.9115 against the greenback — the strongest level since May 2016.

Teng said the local currency had been punished severely in 2015 and had not recovered as much as other currencies in other oil-dependent economies, such as Russia, up to last year.

“Since the shift in the policy towards the end of 2016, Bank Negara Malaysia’s (BNM) new ruling on repatriation of export proceeds has helped the ringgit to slowly crawl its way back to the current level of about RM3.90,” Teng told the media during the asset management’s market outlook and company briefing.

He shared his view that the FV for the ringgit will be between RM3.80 and RM3.90, and that the ringgit could continue to appreciate to that level this year.

Teng, however, pointed out that RM3.80 is seen in the market as a psychological level, as the ringgit was pegged in 1999 to the US dollar at RM3.80.

He said for the ringgit to test those levels, there is a need to find some level of support.

“The US dollar is also not the most preferred currency at the moment, which is a reversal that has taken place as compared to about two years ago … a gradual strength in the ringgit is healthier for the country,” Teng said. He does not expect the greenback to regain much strength despite the anticipation of interest rate normalisation, which will result in higher rates in the US.