The ringgit is anticipated to maintain its relative strength against Group of 10 (G10) currencies in the upcoming week, except the US dollar. This projection comes in light of the European Central Bank’s adjusted lower growth forecast and increased inflation rate.
Stephen Innes, the managing director of SPI Asset Management, noted that the ringgit will likely experience continued depreciation against the US dollar, given the recent upswing in the greenback ahead of the US Federal Reserve meeting scheduled for September 19-20. He added that market watchers are keenly awaiting the Fed’s disclosure of their short-term interest rate projections for 2023.
Optimism grows for ringgit
There is a growing sense of optimism among certain investors who believe that Beijing’s recent efforts to stimulate the economy and stabilize financial markets are starting to yield positive results. That could potentially support the ringgit if upcoming data reinforces this trend. However, the state of China’s property market remains a significant concern for countries like Malaysia, which heavily rely on exports to China.
Innes highlighted that the ringgit’s weakness is primarily influenced by US interest rates and sluggish economic growth in both China and Europe. These factors raise concerns about a potential export recession for Asian economies, leading to increased demand for safe-haven assets such as the US dollar. Innes projected a trading range of 4.67 to 4.69 against the greenback for the upcoming week.
Mohd Afzanizam Abdul Rashid, Chief Economist and Head of Social Finance at Bank Muamalat Malaysia Bhd, anticipated that the Federal Reserve will likely maintain the rate at 5.5% in its upcoming meeting. He emphasized that the focus will be on the Fed’s latest quarterly projections for macroeconomic variables. Given the expectation of a hawkish stance in monetary policy, he foresees the US dollar-ringgit pair hovering around 4.66 to 4.68 in the coming week.
The ringgit weakened against the US dollar on a week-to-week basis, closing at 4.6815/6845, compared to 4.6745/6795 the previous week. However, the local currency saw gains against other major currencies.
The Malaysian ringgit exhibited varied performance against major currencies in the recent foreign exchange market. It saw an appreciation against the British pound, marking a shift from 5.8352/8414 to 5.8196/8233 compared to the previous Friday. Similarly, it gained ground against the euro, trading at 4.9919/9951 instead of 5.0031/0085 in the prior period. The ringgit also displayed strength against the Japanese yen, with the exchange rate at 3.1670/1693, up from 3.1741/1777.
When measured against its ASEAN counterparts, the ringgit demonstrated mixed results. It experienced a slight dip against the Singapore dollar, trading at 3.4350/4374 compared to 3.4277/4312 a week earlier. Conversely, it showed resilience against the Thai baht, with the exchange rate at 13.0681/0812, an improvement from 13.1591/1787 the previous Friday. On the downside, the ringgit declined in value against the Philippine peso, slipping to 8.24/8.25 from 8.21/8.22 the week before. However, it fared marginally better against the Indonesian rupiah, trading at 304.8/305.2 in contrast to 304.9/305.4.
Malaysia among countries establishing regional supply chain
Singapore is taking proactive measures to adapt to shifts in global manufacturing flows by forming partnerships with Malaysia and Indonesia to strengthen its regional supply chain. This collaborative effort aims to capitalize on recent increased investments from India, China, and Southeast Asia.
During an event organized by LSEG and Reuters Newsmaker, Jacqueline Poh, the Managing Director of Singapore’s Economic Development Board (EDB), emphasized the significance of building a robust manufacturing base that encompasses Singapore, the southern Malaysian state of Johor, and the nearby Riau Islands of Indonesia. This cooperative endeavor is designed to position Southeast Asia as a formidable production hub.
Singapore’s goals are to maintain its position as a leading global financial center and leverage the ongoing wealth shift towards Asia. At the same time, the city-state is actively working towards establishing itself as a hub for wealth management catering to the ultra-rich.
Poh also cautioned that the EDB anticipates a relatively subdued year in investments for 2023, following a record-breaking 2022. In the previous year, Singapore secured S$22.5 billion (approximately $16.5 billion) in fixed asset investments, with over 66 percent stemming from electronics manufacturing projects.