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KUALA LUMPUR, 10 Jan 2017:
The ringgit, expected to move between 4.50 and 4.60 to the US dollar in the first half of this year, could appreciate to 4.40 towards the end of the year – due to expectations crude oil prices could rise to US$70 per barrel by then from about US$54 currently.
Standard Chartered Bank Global Research FX strategist Divya Devesh said the bank was bullish on the increase in oil prices and “this should support the currency (ringgit)”.
“We anticipate it may appreciate further to the 4.30 level in early 2018,” he said at the bank’s Global Research Briefing here today.
Divya said another factor that would support the ringgit was the stabilisation of the US Federal Reserve (Fed) rate increase expectation.
“The market has already priced in five Fed rate increases in the next two years.
“By the second half of this year, it is quite possible that the market expectation starts to stabilise, and as that happens, it should provide positive support for the currency.”
In the context of a stabilised Fed increase expectation and higher oil prices, Divya said foreign investors might want to review their portfolios.
“The ringgit has somehow disconnected from the fundamentals, which are still strong and valuation for the ringgit is extremely attractive.
“With these reasons to support the ringgit, we believe foreign investors who have been holding onto the underweight Malaysian debts and equities markets, would want to review their positions, thus creating inflows back into Malaysia.”