KUALA LUMPUR: The ringgit is expected to be an outperformer in the region this year, strengthening to between 4.40 and 4.30 against the dollar by year end as external developments exert less pressure.
Affin Bank Bhd group chief economist Alan Tan Chew Leong said the ringgit is poised for a positive shift in 2024, contrasting its 2023 performance with regional currencies like Indonesian rupiah, Thai baht, and Philippines' peso.
"Similarly, when comparing Japanese yen and Chinese renminbi, ringgit has depreciated, but with the improving economic fundamentals of Malaysia, both yen and ringgit are expected to appreciate.
"Japan and Malaysia are anticipated to be outperformers this year, experiencing a notable turnaround after the Japanese yen depreciated by 7 per cent against the US dollar and ringgit by 4.1 per cent."The economic fundamentals of these two countries are projected to be significantly stronger in the current year," added Tan.
Affin Bank head of research Loong Chee Wei said they are expecting the ringgit to start appreciating against the dollar once the US Federal Reserve starts cutting their policy rate.
"Over the past couple of years, the interest rate differentials between regional and US rates have favoured the latter due to its upward trend," he added.
He said despite some regional central banks raising rates, the attractiveness of US rates has led to capital outflows to US-denominated assets.
"However, a reversal is anticipated, possibly in the second half of 2024 (2H24), as the US Federal Reserve considers normalising or cutting interest rates.
"If major central banks in the region maintain their rates, this shift could result in increased capital inflows to the region, fostering a positive sentiment for the ringgit. Consequently, we expect the ringgit to hover around the 4.40 level by year-end, " Loong said.
He noted that this trend is likely to extend beyond Malaysia, with similar patterns expected in the region, including the appreciation of the Japanese yen and renminbi against the dollar.
Loong was speaking to media at Affin Bank's Macro Economic Outlook 2024 media briefing today.