KUALA LUMPUR, June 27 — The Malaysian ringgit’s woes are set to worsen in coming months, according to Fitch Solutions Macro Research that cut its outlook for the currency for the rest of the year and 2020.
The Fitch Ratings units said it was revising its prediction for the ringgit downwards on the belief that it will be among emerging market (EM) currencies set to be hammered by the escalating US-China trade war.
While it acknowledged an improvement vis-a-vis the dollar this month, it pointed out that the ringgit was still below previous forecasts that had placed it at 4.05 against the greenback for 2019.
The ringgit has averaged around 4.12 to the dollar so far this year.
“We believe the balance of risks over the coming months will remain tilted to the downside, and as such, we are revising our 2019 average forecast to MYR4.15/USD, from MYR4.05/USD previously,” it said in a research note released today.
The research house also predicted that the ringgit will be range-bound between 3.85 to 4.20 versus the dollar in coming months, exacerbated by the market’s less favourable view of Malaysia among other EM nations.
Conditions are also not expected to improve for the ringgit in 2020, with Fitch Macro Solutions seeing the ringgit averaging 4.25 to the dollar for the entirety of next year.
The ringgit began its downward spiral in 2015 when global oil price fell drastically and forced the revision of the federal budget. Conditions were then made worse by the emergence of the 1Malaysia Development Berhad global corruption scandal.
The currency had appeared to be on the mend again last year but political developments in the country and the eruption of the US-China trade war erased previous gains.
Bank Negara Malaysia’s efforts to support the ringgit caused the US to put the country on a list of alleged currency manipulators, which the central bank protested as baseless after noting that it did not behave unusually from others in the foreign exchange market.
The weak ringgit has already contributed to rising costs in the country, with a recent survey showing Kuala Lumpur as rising four spots to become the 141st most expensive city globally.
Source: The Malay Mail Online