KUALA LUMPUR – Standard Chartered Bank (StanChart), which displayed a cautiously positive sentiment towards the ringgit, foresees the Malaysian currency appreciating to RM4.0 against the US dollar in a year’s time.
The bank’s head of fixed income, currencies and commodities investment strategy, Manpreet Singh Gill, told reporters at a media briefing on global markets investment outlook that the bank projects the ringgit settling between RM4.20 and RM4.30 against the greenback by the end of the year.
The bank expects the US dollar’s strength to wane, or “potentially softening a little bit”, which will bode well for the ringgit as it will potentially take away headwinds.
“Oil prices will no longer be a detractor (although) it was one of the many reasons that pulled the ringgit down,” Manpreet said on crude oil being one of the factors playing out in the currency’s strength.
“As long as we don’t get a weakening or collapse in oil prices, that would be a supportive factor.”
Besides that, the improved outlook of the emerging market’s yield returns is also seen as a supporting factor for the ringgit, which weakened marginally by 0.02% to 4.2980 against US dollar as at 5pm yesterday.
On another note, StanChart has become “increasingly constructive” of the bond and equity markets of emerging economies, including Malaysia, on the back of good yield returns, thus upgrading its views on the capital market.
Yields from the Malaysian capital market are quite high among Asian equities, according to Manpreet.
As the US dollar rally is expected to draw to an end, bond and equity market performance in the emerging markets will also improve.
StanChart views that the global market could possibly be heading towards a cycle of reflation (growth and inflation picking up) from the current “muddle through phase” (slow growth and low inflation).
Nonetheless, both scenarios will be advantageous to the capital market as in the “muddle through” environment, interest rates are not expected to rise much, thus lowering the bar for the equity market to level.