KUALA LUMPUR: MIDF Research has revised its projection for the ringgit to close 2024 at RM4.03, a notable improvement from RM4.59 at the end of 2023.
The firm said the average for the year is expected to remain at RM4.56, consistent with last year's value.
"Despite the ringgit being top performing currency gaining from the US Federal Reserve (Fed) rate cuts as well as the recent optimism from China's new stimulus, the relatively weaker average rate was influenced by the persistent strength in the US dollar in the earlier part of the year as the Fed was not in the rush to shift towards policy easing.
"On the other hand, any events which lead to heightened concerns over the growth outlook would be downside risks to the ringgit outlook as the US dollar will gain from a shift to risk-off mode," it said in a note today.
MIDF Research said the downside risks for the local note include renewed escalation in geopolitical and trade tensions, and a weaker outlook in major economies (particularly China and the US).
It noted that the Fed may take time to ease further if the price outlook turns out to be stickier and remains elevated, and as a result, slowing the decline in the US dollar.
The reversal of performance, erasing the earlier weakness in the first half of 2024 (1H24) has seen the ringgit becoming the top-performing currency in the region.
Year-to-date, the ringgit has appreciated by more than nine per cent year-to date (YTD) from the end of 2023, with the local currency recently exchanging at lower than RM4.20 to the dollar.
"On balance, we foresee more funds will flow into the emerging markets, including Malaysia, as the Fed continues with its policy easing.
"With overnight policy rate to be kept unchanged, the narrowing interest differentials will also be supportive of the ringgit, gaining from the weakening of the US dollar," the firm said.