At 9am(0100gmt), the local unit stood at 4.2840/2880 against the greenback from 4.2865/2895 last Friday.
KUALA LUMPUR: The Malaysian ringgit has been the best-performing currency in Asia ex-Japan so far in the second quarter, gaining c.2.5% against the US$, says Standard Chartered Global Research.
It said on Thursday the ringgit-supportive factors have been in place for some time now – exceptionally attractive valuations, underweight foreign investor positioning and improving external balances.
“The key hurdle, however, has been weak sentiment, which now seems to be improving,” it pointed out in its research note.
On Bursa Malaysia, foreign investors have been net buyers of Malaysian equities for four straight months, with net inflows of US$2.2bil year-to-date.
“Perhaps more importantly for the ringgit, foreign investors also turned net buyers of Malaysian debt in April,” it pointed out.
“We think this improved sentiment and flow picture has been as much a result of domestic factors (allowing foreign investors to hedge up to 100% of ringgit exposure without documentary evidence) as of global factors (continued inflows to emerging markets leading to stretched valuations elsewhere).
StanChart Research pointed out that based on the scale of portfolio outflows in the past four years, there is significant room to catch up, which should support further ringgit gains.
“While we currently forecast a return to ‘fair value’ of around 4.10 for US$-ringgit only in in the first half of 2018, risks of this happening sooner have clearly increased.
“While a stronger ringgit might be seen as a signal of confidence in the domestic economy, we think the central bank may aim to rebuild its forex reserves more determinedly at some point.
“Malaysia’s forex reserves are currently at their lowest in 11 years, after accounting for the central bank’s position in the forward book of net short US$17.7bil (as of end-March),” it said.
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