The high debt, however, was largely denominated in ringgit, mitigating external risks for Malaysia.
KUALA LUMPUR: The ringgit still has its upside as it will benefit from the country’s strong linkage in the global supply chain amid robust global export volumes, says AmBank Research.
The research house said on Tuesday that expectation of improving public finances, surplus current account, healthy reserves and foreign appetite into the local bourse and bonds space will continue to support the ringgit.
It pointed out that onshore sentiments for the local currency has improved.
For the second quarter of 2018, it sees the ringgit trading at an average of 3.922 to the US dollar, 3.916 in Q3 of 2018 and 3.907 in Q4 of 2018.
In Q1 of 2019, it sees the ringgit trading at an average of 3.899 and at 3.896 in Q2 2019; 3.889 in Q3 2019 and 3.881 in the final quarter of the year.
“Although Bank Negara is expected to maintain the accommodative monetary policy with the aim of supporting growth and stabilising inflation, the possibilities for another rate hike could happen if the demand-pull inflation kicks in strongly and the US Federal Reserve moves into a four rate hike,” it said.
AmBank Research said the undervalued currency based on fundamental analysis as well as real effective exchange rate will provide support to the ringgit.
To recap, it said that mixed incoming macro data somewhat contained the slide in the ringgit against the US dollar.
“Though the ringgit is expected to experience volatility along the path, the downside risk remains fairly contained, supported by the macro fundamentals.
“Economic growth will be supported by domestic demand i.e. private consumption while investment remains supportive of the recovery sustained by a buoyant business sentiment, the need to upgrade the capital investment and rising profits,” it said.
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