KUALA LUMPUR: MIDF Amanah Investment Bank Bhd’s research arm, MIDF Research, expects the ringgit to appreciate with an average rate of RM4.23 versus the US dollar this year.
In a note today, MIDF Research said that, however, the strengthening in the local note is expected to be at a more gradual pace on the back of the movement in the United States monetary policy trajectory.
"Although the unwinding of the US monetary policy will be slower than previously expected and interest rate differential spreads may continue to remain wide, the narrowing later in the year will still favour the emerging market currencies including the ringgit,” it said.
MIDF Research also said Malaysia’s growth fundamentals remain supportive for the ringgit to strengthen given the continued surplus in terms of the balance of trade and current account.
Meanwhile, in a separate note, MIDF Research said the ringgit slightly appreciated against the US dollar in January 2025, which increased by 0.3 per cent month-on-month and ended the month at RM4.458 from RM4.472 being the highest level last month.
"The dollar's performance last month was largely driven by shifts in market expectations regarding the US monetary policy trajectory, compounded by the policy uncertainty surrounding the newly formed US government,” it said.
MIDF Research said it still maintains an outlook for a single 25 basis point (bps) rate cut in the second half of 2025 (2H 2025).
"We expect a further narrowing of the interest rate differentials for this year, with the US Federal Reserve (Fed) continuing its policy easing in 2H 2025 causing capital flows to shift back to emerging currencies including the ringgit,” it said.
MIDF Research continues to expect Malaysia’s economic growth will be more normalised at 4.6 per cent in 2025 after a more robust growth last year (estimated at +5.1% based on advance estimate).
"The drivers of economic growth will come from sustained expansion in domestic spending and continued recovery in the external demand,” it added.
Nevertheless, it remains cautious that the growth outlook may be constrained by downside risks such as worsening geopolitical and trade tensions, which will disrupt the stability of the global supply chain and international trade flows. - Bernama
