KUALA LUMPUR – The Malaysian ringgit is set for its best quarter since 1973, with a likely refrain by the central bank from cutting interest rates seen to extend the currency’s rally.
The ringgit has risen more than 12 per cent against the US dollar so far in this quarter, making it the best performing emerging market currency.
Against the Singapore dollar, the ringgit is up 6 per cent from 3.4762 per Singdollar on June 28 to 3.2584 on Sept 20.
Narrowing rate differentials with the United States, improving trade performance and attractive asset valuations may help the ringgit strengthen further, analysts said.
Robust economic growth and a potential pickup in consumer prices if the government proceeds to remove some fuel subsidies may keep Bank Negara Malaysia on hold into 2025 even as other central banks start to lower borrowing costs.
Foreign investor flows and further conversion of foreign currency deposits will also support the ringgit.
“Malaysia’s current account surplus, neutral central bank stance and stable fundamentals may help with further gains in light of dollar weakness,” said Sumitomo Mitsui Banking Corp head of Asia macro strategy Jeff Ng. “This is particularly so if markets expect more rate cuts by the US, reducing yield differentials between the US and Malaysia.”
The ringgit has been on a tear since April after a rebound in exports and efforts by the central bank to encourage state-linked companies to repatriate overseas investment income.
The rally picked up steam in this quarter as investors bet on South-east Asian winners amid the prospect of policy easing by the US Federal Reserve.
Global funds have poured a cumulative US$2.5 billion (S$3.2 billion) into the nation’s bonds in July and August, and bought US$1.2 billion of local equities since the end of June, according to
