15 May, KUALA LUMPUR – The ringgit is expected to strengthen to the RM4.30 level in the fourth quarter of 2020 (Q4 2020) as the the potential of the US dollar strengthening will be limited, with more weakening pressure.
Ambank Research said this is in part due to the risk of a more severe and protracted global recession that has diminished.
“Global lockdowns and movement control order measures are slowly being relaxed. Adding on, the once macro and earnings disappointments, which are expected to continue in the next few months, will start easing,” it said in a statement.
The research house said the focus will be on forward looking figures which would suggest a stronger and more durable recovery in 2021.
Thus, it said there are strong possibilities for investors to shy away from safe-haven currencies like the dollar and yen, and to be open for alternatives.
“Another driver for a weaker dollar over the longer horizon will be from the impact of the US Federal Reserve’s aggressive move to combat the virus crisis by injecting a huge amount of dollars into both the domestic and global economy,” it said.
The research house said the US dollar has outperformed the majority of its most liquid peers so far in 2020.
“Looking at the prospects for the dollar, it is expected to outperform its rivals, including the ringgit, in the near term, which is over coming weeks to around three months, given that it is the most liquid safe-haven currency,” it said.
Besides, in the near term the ringgit will be influenced by the ongoing external headwinds, oil price volatility, strengthening dollar, as well as domestic challenges such as politics, incoming macro data, corporate earnings, and the ringgit-dollar liquidity, it said.
Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said in the longer term the ringgit should appreciate as the reopening of the economy would translate into higher growth.
“Sizeable economic stimuli could accelerate the economic recovery should the reopening of the economy become stable,” he told Bernama.
Mohd Afzanizam said currently the reopening of the economy is gaining speed despite resurgence in new COVID-19 cases in China and South Korea.
“Not to mention the constant criticism on China by US President (Donald Trump) in respect to COVID-19 spread which can be very unhealthy to the global economy.
“Therefore, demand for safe-haven currencies such as the US dollar should prevail in the immediate term,” he added.