KUALA LUMPUR: The ringgit is expected to strengthen to RM4.20 to RM4.30 to the US dollar by the end of 2023, according to AmBank Research.
In its 2023 economic outlook report, the research house said the fundamentals of the ringgit remained strong given the recovery in the tourism sector.
“As the tourism sector gains some steam, Malaysia may also see a narrower deficit in its services account, which could bode well for the ringgit,” it said.
AmBank Research’s positive view is in contrast with sentiments in the third and last quarters of 2022 when the ringgit fell to new lows against the US dollar.
For instance, it dropped to 4.4748 to the greenback on Nov 5, last year, the lowest since the 1997-1998 Asian financial crisis.
The ringgit recovered some ground last week on anticipation of a more hawkish stance on interest rate by the US Federal Reserve but lost some of the gains this week.
It opened at 4.3305/4.3350 against the greenback today, down from last Friday’s close of 4.3325/4.3375.
Nonetheless, AmBank Research expects some upside as the number of tourists arriving in Malaysia reached 1.24 million in September last year.
The average arrivals per month over the last 10 years was 2.15 million.
The reseach house said the fundamental aspects of the ringgit was also supported by the country’s economic growth, with domestic growth in 2023 anticipated to be around 4.5%.
This means that the firm does not see any recession in Malaysia despite the view that it is inevitable in other major economies.
Additionally, inflation in the country is at a manageable level vis-à-vis major economies while early preemptive moves made by Bank Negara Malaysia ensures that inflation is well contained without jeopardising economic growth.
“The final 25-basis-point rate hike expected is unlikely to become a pronounced obstacle for labour market to continue improving,” it said.
In conclusion, while US dollar weakness remains as the baseline view, the research firm did not think the greenback should trade at around or below 4.00 levels as that implies overvaluation of the ringgit.
