KUALA LUMPUR: BMI, a Fitch Solutions company, has revised its end-2025 forecast for the ringgit to RM4.40 per US dollar (USD) from RM4.50 previously.
Over the medium term, it said the ringgit looks set to remain on a gradual appreciatory trend on the back of a robust growth outlook and sustained current account surplus.
"Risks to our currency forecasts are skewed towards a weaker ringgit. A hawkish US Federal Reserve (Fed) poses upside risks to our US interest rate view, which could see it cut by 50-75 basis points (bps) less than our current forecast (100bps) and in turn, leaves less scope for the ringgit to appreciate,” it said in a research note today.
BMI said from a technical perspective, the unit has depreciated by more than eight per cent since touching trendline resistance at RM4.10 per USD level in early October 2024.
"Additionally, momentum indicators are starting to look oversold, which should lead to short-term appreciation and falls in line with our forecast for the unit to trade between trendline support of RM4.80 and RM4.20 per USD by mid-2025,” it noted.
Meanwhile, it also expects interest rate differentials between the US and Malaysia to narrow in favour of the ringgit.
At their December 2024 meeting, the Fed enacted a hawkish 25 bps cut to 4.50 per cent, in line with BMI’s and consensus expectations.
"We think the Fed’s easing cycle has further to run and expect the Fed funds rate to touch 4.00 per cent by the first half of 2025.
"In contrast, we expect Bank Negara Malaysia to leave its overnight policy rate on hold during the same period,” said BMI.
Beyond the six-month horizon, BMI anticipates a slower appreciation in the ringgit. It expects it to strengthen marginally to RM4.30 per USD by end-2026.
"Our US team has revised their end-2025 and 2026 rate forecasts to 3.50 per cent, from 3.00 per cent following Donald Trump’s victory in the US presidential elections. This will put a lid on the ringgit’s appreciation but other factors will support the ringgit,” it added. - Bernama
