HLIB: Ringgit to hit 3.55-4.20 level against US$ in 4Q

comments     Bernama     Published     Updated

The ringgit is forecast to reach the 3.55 to 4.20 level against the US dollar by the fourth quarter of this year, and hit 4.00 at year-end as the strength of the greenback will eventually taper off due the recent dovish Federal Open Market Committee (FOMC) statement.

Hong Leong Investment Bank (HLIB) said the depreciation pressure on emerging currencies, including the ringgit, would ease in the short term.

The investment bank said the US Federal Reserve (Fed) would be very careful on its interest rates liftoff to ensure that growth momentum was not jeopardised.

“We expect the Fed liftoff during the December FOMC meeting. For 2016, we believe that the rate hike will be gradual, at best, a 25 basis point hike in alternate FOMC meeting to a total of 100 basis points,” it added.

On China, HLIB said the Chinese authorities would now refrain from making major moves that would further destabilise its market.

“Moreover, we expect fiscal measures to be introduced by year-end to arrest the declining growth momentum,” it added.

The investment bank noted that the developments would eventually help to ease the concerns about competitive devaluation pressure and protracted slowdown in the Chinese economy.

On the local front, HLIB said the mandate of government-linked companies’ (GLC) fund repatriation would continue to gain pace while the Fed was likely to go even slower on its interest rates hike plan.

It also expects Bank Negara Malaysia’s reserves to stabilise, possibly inching higher in the next few months.

“The psychological level to watch out for is US$92 billion as any level below this will denote reserves to short-term external debt ratio of less than 1.0 times,” it said.

HLIB also expects the upcoming 2016 Budget announcement on Oct 23, 2015 to contain some measures to safeguard growth.

It reiterated that the central bank would continue to leave its overnight policy rate unchanged at 3.25 per cent until end-2015.

- Bernama



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