KUALA LUMPUR: The ringgit has hit 3.8853 against the US dollar in late trading today (Thursday), its strongest point since April 2016, after Bank Negara Malaysia raised the overnight policy rate (OPR) for the first time in three-and-a-half years.
Bank Negara raised the OPR by 25 basis points to 3.25 per cent.
Maybank Investment Bank Bhd and Standard Chartered Bank believe the ringgit is still undervalued despite its upswing since recent weeks.
The latter’s Global Research Macro Strategist, Mayank Mishra said the bank was positive on the ringgit’s outlook with an expectation to stay broadly at the 3.90 level against the greenback.
“We still think the ringgit is an undervalued currency in Asia’s emerging market, and therefore, extremely attractive from a valuation standpoint,” Mishra told reporters at a briefing today.
Maybank IB chief economist Suhaimi Ilias said the ringgit still had not truly recovered from the hit it took between 2013 and 2016.
“The ringgit lost some 30 to 35 per cent in value after enduring prolonged losses between 2013 to 2016, mostly on the back of falling oil prices and a myriad of external factors,” he said at an interview with the NSTP Group journalists at Invest Malaysia 2018 on
“Though we are projecting the ringgit to end at RM3.90 against the dollar by year-end, we still believe that the ringgit is undervalued given the supportive fundamentals such as firmer crude oil prices, external reserves rebuilding, sustained trade and current account surpluses and the likes,” he added.
Suhaimi shared that Maybank FX Research fair value estimate for the ringgit against the dollar is at RM3.70.
“There are two big external factors this year which would impact the ringgit. The first, is the potential hike of the OPR, and the other is the 14th General Election. The combination of these two events will exert some volatility and selling pressure in the interim,” he added.
Suhaimi backed the government's decision to not peg the ringgit to the dollar.
“Not pegging the ringgit is definitely the right way to go as this decision reflects our sound market policies, which the government has put in place.
“At the end of the day, there will always be noises, but what we have known now is that the market will always look beyond the noises and that's already reflected in our strengthening ringgit and growing gross domestic product (GDP),” he said.
Maybank IB expects a GDP growth of 5.3 per cent, continuing the momentum from 2017. This will be driven by continued growth in both consumption and investment, while exports and imports will expand further on the back of sustained global growth momentum.