KUALA LUMPUR: Bank Negara Malaysia (BNM) is optimistic that the ringgit will appreciate towards the end of the year, driven by structural reforms and positive growth prospects.
Deputy governor Datuk Marzunisham Omar stressed that based on the internal studies conducted by BNM, the local currency is currently undervalued.
“BNM has models that we use to estimate the fair value of the ringgit.
“All our models consistently show us that it is undervalued ... (the current value) is mainly driven by the sentiment which we believe ignores the fact that Malaysia has a positive growth prospect, moderate inflation and with the reforms that we’re going to implement, our economic competitiveness will improve.
“All these are real economic factors that will shoot (upwards) and will support the strengthening of the ringgit,” he told reporters after the 2024 BNM governor’s address on the Malaysian economy and panel discussion today.
Asked on the projected appreciation value by year-end, he declined to comment but reiterated that the central bank’s stance that the ringgit is expected to strengthen this year.
“We don’t comment on the level (it is expected to appreaciate ) but we are confident that with all the good prospects and the reforms, that this will contribute to the strengthening of the ringgit.”
Meanwhile, Malaysian Economic Association deputy president Professor Dr Yeah Kim Leng noted that the ringgit is relatively weak at the moment, mainly attributed to the interest rate differential between the ringgit and the US.
“The US Federal Reserve is expected to start easing interest rates by the middle of the year and they are projecting at least three cuts this year.
“If the US reduces interest rates, our ringgit will strengthened on the back of a weakening US dollar,” Yeah said, adding that Malaysian fundamentals underpinning the local currency is also strengthening in terms of wider current account surpluses as well as rising exports.
Importantly, he said “so called sustained growth and investment” are the key fundamentals supporting the ringgit value.
“We will likely see between RM4.50 to RM4.60 (against the US dollar) by the end of this year.
“So we are quite positive that ringgit will recover mainly due to the (expected) reversal of the strong US dollar given that the US economy now is weakening and they need to cut interest rates.”
Marzunisham reiterated that the central bank expects the local economy to continue to grow, driven by the recovery of global trade, improved tourism activities and the upcycle of the technology sector.
BNM has projected for the Malaysian economy to grow between 4% to 5% this year, from 3.7% recorded in the prior year.
“The (factors) will have a spillover effect on the Malaysian economy.
“Our external sector will recover.
“Household spending and private consumption will remain the key drivers of growth with favourable labour market wages anticipated to continue improving, which will provide support to household spending ... investment is also picking up again,” Marzunisham said.
