KUALA LUMPUR: Kenanga Investment Bank Bhd
(Kenanga IB) expects the ringgit to trade closer to 4.40 by year-end, based on emerging signs which suggest the United States (US) Federal Reserve (Fed) may cut its rate by only 50-75 basis points (bps) this year.
The market currently anticipates rate cuts of 100-125 bps this year.
In a note today, it said that the sentiment could lead to a US dollar rebound in the fourth quarter of 2024.
"We have been bullish on the ringgit since last year, forecasting it to reach 4.25 by end-2024, driven by expectations of US economic weakness and subsequent Fed rate cuts,” it said.
Last Friday’s key US jobs data continued to keep the market guessing whether the Fed will cut the rate by 25 or 50 basis points in September, with the probability of the latter dropping back to 30.0 per cent.
Meanwhile, Kenanga IB expects Bank Negara Malaysia (BNM) to maintain its current monetary policy for the next 12-15 months, in view of subdued inflation and steady economic growth.
"However, upside risks to inflation, arising from changes in government policies and external risks, especially geopolitical tensions, remain. Undoubtedly, BNM will stay vigilant and ready to respond if necessary,” it said.
The ringgit had surged in August, becoming the world’s best-performing currency with a sharp 6.0 per cent appreciation, supported by a sharp correction in the US dollar as the Fed hinted at a possible rate cut in September amid cooling inflation and a weakening labour market.
The local note’s performance was further bolstered by Malaysia’s strong growth outlook, stable monetary policy, fiscal reforms and relative political stability, added Kenanga IB. - Bernama
