KUALA LUMPUR: The ringgit is likely to strengthen against the US dollar further following its appreciation by more than 9.0 per cent since April this year.
Octa analyst Kar Yong Ang said ringgit is poised for continuing appreciation, targeting the 4.250 to 4.200 level.
He stated that the stronger ringgit is supported by a robust domestic economy, which has been doing rather well lately.
"Thanks to strong household spending, exports, and investment, the country's gross domestic product (GDP) expanded at an impressive 5.9 per cent rate in the second quarter of this year, the fastest pace in 18 months," he said in a statement.
As Bank Negara Malaysia (BNM) forecasted full-year growth near the upper end of its forecast range of 4.0 to 5.0 per cent, Kar said Malaysia's economy is likely to outperform its closest neighbours, including China, Singapore, Thailand, and Indonesia.
On the overnight policy rate (OPR), he said it is likely that BNM will keep interest rates unchanged at 3.0 per cent in the midterm, given the concern that inflation may return if the government continues to pursue subsidy cuts.
"The government and BNM have implemented coordinated measures to increase flows into the forex market to ensure the ringgit remains stable, especially the authorities cooperation with state-linked companies to encourage them to repatriate and convert their foreign investment income more regularly.
"Their efforts also included stepping up engagements with international investors to minimise devaluation pressure on the ringgit. Their politics have certainly paid off," Karadded.
At the same time, he said, Jerome Powell essentially confirmed that the US central bank is embarking on a major rate-cutting cycle.
Meanwhile, looser monetary policy in the US and other major economies may help prop up global demand and pull the prices for Malaysia's key export items higher, specifically on petroleum products, liquified natural gas (LNG), and palm oil.
"This, in turn, should improve the balance of trade and add to the current account surplus, supporting the ringgit and pushing the USD/MYR pair down," he added.