KUALA LUMPUR: Some of the world’s biggest banks have revised the ringgit forecast stronger against the US dollar in 2019 after the currency beats estimate in the last quarter, with one bank from Japan expecting it to breach below RM4 later this year.
In the fourth quarter of last year, the ringgit strengthened to RM4.13 on average, beating estimate of RM4.19 against the greenback.
Experts believe the optimistic forecast was mainly due to the more positive developments on the external fronts. This included United States Federal Open Market Committee’s (FOMC) decision to slow down the rate hikes this year as well as improving relations between United States and China.
The ringgit traded higher at RM4.0950 against the dollar than Thursday’s RM4.0990, rising on the biggest weekly gain since March last year.
According to Bloomberg’s survey of economists and investment banks, the consensus target for ringgit in 2019 now stood at RM4.12 against the dollar, from RM4.20 previously set in the beginning of the year.
Mizuho Bank, one of the largest financial services companies in Japan, is the most optimistic among all that updated their forecasts this week as it sees the ringgit to strengthen below RM4 by the third quarter of this year.
On Wednesday, it set a target of RM 3.98 and RM3.96 for the third quarter and fourth quarter of this year respectively.
Silicon Valley Bank, a subsidiary of one of the largest banks in the United States - SVB Financial Group - on Thursday revised the ringgit upward to RM4.10 for the first quarter of 2019 from RM4.20 previously.
This is the same forecast with CIMB Investment Bank, Canadian Imperial and Scotiabank, which set their estimates for the quarter late last month.
The Silicon Valley Bank, however, expects the ringgit to ease to RM4.13 by end of this year.
Other banks which updated their ringgit forecasts this week include ING Financial Markets and Rabobank.
“I think it has a lot to do with the US interest rates. The signal from the FOMC member is that the rate hike is going to be very gradual as the central bank has become increasingly mindful on the impact it may have on the economy if the tightening process is done excessively,” Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told NST Business.
MIDF chief economist Dr Kamaruddin Mohd Nor said the expectation of weakening dollar as Fed rate hike take a pause and improving commodity prices as well as positive outcome from trade talk between US and China will provide impetus for ringgit.
Australia & New Zealand Banking Group in Singapore head of research Khoon Goh told Bloomberg that the ringgit had benefited from improving global sentiment with the next support level being RM4.06 per dollar.
Khoon said Asian foreign exchange had been buoyed by a patient Federal Reserve and improving US-China relations, and there is scope for further gains if the US partial government shutdown starts to undermine the dollar.