KUALA LUMPUR, Oct 19 — The ringgit is expected to range from 4.40 to 4.70 against the US dollar next year, supported by Budget 2024 initiatives, according to RHB Research.
Its quantitative analysis suggests the ringgit will benefit from an improved Malaysia-centric interest rate, trade, and fiscal matrices while being dragged by potentially lower oil prices and higher public debt.
“The ringgit may see some consolidation as early as the first quarter of 2024 at around 4.6 to 4.7 versus the US dollar in the first quarter (1Q) of 2024 on the back of peak Federal Funds Rate in the fourth quarter (4Q) of 2023 and short-covering behaviour as Malaysia-centric macroeconomic backdrop improves into the first half of 2024 (1H24),” RHB Research said in a note.
The local currency will be supported by improving current and fiscal accounts balances in 2024, while a recovery in the FTSE Bursa Malaysia KLCI and narrower US dollar carry will help.
It said headwinds to the ringgit could be perceived from potential consolidation in Brent crude and higher national public debt in 2024.
RHB Research remains positive on the ringgit in 2024 based on its forecast for Malaysia’s gross domestic product (GDP) to expand by 4.6 per cent with the balance of risks tilted to the upside.
“Despite the slowdown in exports in the latest reading, we expect Malaysia’s high-frequency externally-facing indicators (especially trade and manufacturing) to be supported in 2024 when trade winds improve,” it said.
Besides, Budget 2024 would also be positive on GDP and equities while likely to exert upward inflation pressure.
RHB Research viewed the latest budget as mildly expansionary, with substantial allocation for development in support of the priority sectors and targeted groups.
On trade performance, it expects to see early improvement signs in trade data by 4Q 2023.
However, RHB Research maintains its full-year export projection at -9.4 per cent year-on-year (y-o-y) for 2023 versus the official projection of -7.8 per cent y-o-y.
“The contraction in export data (on y-o-y term) will likely be extended into 4Q 2023. But we expect a smaller contraction in export data by 4Q 2023, with the potential of export data turning positive by 1Q 2024,” it said.
A more solid recovery is expected by 1H 2024.
“We begin to see some signs of dissipation in the downside risks, like the global technology cycle downturn might be close to the end, and there are early signs of recovery in China’s economy.
“The catalyst to our view is predicated on three main factors: the resilience in the US economy coupled with improved economic prospects of Asean economies, rebound in the global technology cycle, and early signs of recovery in China,” RHB Research added.
— Bernama
