At 9 am(0100gmt), the local unit was traded at 4.1490/1520 against the greenback from Monday's close of 4.1480/1510.
KUALA LUMPUR: RHB Research sees the ringgit recovering against the US dollar following the six major initiatives were undertaken by Bank Negara Malaysia to enhance liquidity of the local financial market as well as to strengthen the domestic forex market.
Its head of rates/forex strategy, global treasury and global markets Suresh Ramanathan said these enhancements in the FEA rules are seen as positive to mitigate and/or to soften the impact from recent external headwinds that are affecting the ringgit.
“We believe Malaysia’s fundamentals are still intact, growth at 4.5% in Q1 2019 and above market consensus. Current account balance in surplus of RM16.4bil vs RM10.8bil in Q4 18, was larger than expected while Brent prices are north of US$70 per barrel,” he said.
He sees the ringgit rising to 3.90 against the US$ in Q2 and 3.86 in Q3 and 3.80 in Q4. The ringgit is expected to firm up further to 3.76 in Q1 of 2020 and 3.70 in Q2 of 2020.
Suresh said the ringgit faced risks mainly from the lack of dollar liquidity in the onshore market and was a key driver of the recent underperformance of the currency.
“We believe the inclusion of Trust banks’ and Global custodians in the dynamic hedging program will increase the dollar liquidity into the system and provides the smooth FX transaction for offshore investors when they profit take in their trades.
“The ability to buy forward contracts in Ringgit beyond the current 25% of underlying assets, indicates the onshore forward market and the offshore forward market (NDF) gap could narrow, since offshore investors can hedge more in the onshore market.
“We are keeping intact our US$/ringgit forecast levels and the recent initiatives by Bank Negara strengthens our conviction of further gains are in store for the currency,” he said.
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