KUALA LUMPUR, Jan 5 — Maybank Investment Bank Bhd (Maybank IB) is projecting the ringgit to end 2023 stronger at 4.05 against the US dollar from the current 4.4-level as sentiment leans towards the upside with the greenback taking a breather from its 2022 rally.
Head of foreign exchange (FX) research and strategy, global market Saktiandi Supaat said the local currency would strengthen in a sustained manner as concerns over the United States (US) Federal Reserve rate hikes and political uncertainty that dampened sentiment on the ringgit in the last few months have now dissipated.
He said the fall in commodity prices from 2022 peaks might weigh on the ringgit but the impact would be moderated as the trade balance holds up on China’s reopening and the ringgit looks cheap in real effective exchange rate (REER) terms.
“The outlook for the ringgit should hence lean (towards the) positive although we stay wary of risks such as a higher-than-expected US federal funds rate or a global economic recession,” Saktiandi told a virtual media briefing on the FX outlook today.
He said the local currency is forecast to end the first quarter of 2023 at 4.4 per cent against the US dollar, and further recover to 4.25 in the second quarter and 4.15 in the third quarter.
Saktiandi also said the reopening of China’s international borders will benefit Asean FX especially in the areas of trade and tourism.
He said trends in trade balances and exports to China suggest that the ringgit, Vietnamese dong and Indonesian rupiah could show a resilient performance, while the return of Chinese tourists would be a significant positive for the Thai baht in 2023.
“Regional currencies remain sensitive to yuan swings, and positive movements of the Chinese yuan could result in pretty significant spillover effects for Asean FX,” Saktiandi said.
The strength of the US dollar, which followed a series of interest rate hikes in 2022, would eventually diminish with the currency likely to witness choppy trading in the first half of this year.
However, the second half of 2023 should see a confluence of factors weighing on the greenback, including Europe’s recovery from recession, China fully exiting the Covid-19 pandemic, a peak in US interest rates and moderation in inflation, and a further monetary tightening by the Bank of Japan, he said.
“Therefore, the US dollar is not expected to be as strong as in 2022. However, risks to our views remain such as a sharp US recession weakening risk sentiment or easing in Russia – Ukraine tensions, both of which can push the US dollar more sharply in either direction,” he added.
— Bernama
