Ringgit to stabilise this year on positive sentiment, says MIDF

The ringgit is expected to stablise between 4.10 and 4.15 against the US dollar this year as sentiment towards the local note has changed positively, says MIDF Amanah Investment Bank Bhd Head of Research Zulkifli Hamzah.

He said sentiment for the ringgit has recovered, judging from the currency's appreciation on Monday despite crude oil prices falling as low as US$27.67 per barrel, its lowest since 2003.

"Oil price has tumbled to below US$30 per barrel, where previously, if that happens, the ringgit would definitely collapse (but it didn't).

"The ringgit is no longer seen as a sick currency. Its volatility has come down and correlation with oil prices has become unpredictable," he said in his presentation at Export Day 2016 here, today.

Zulkifli was one of the speakers at a session titled Global Economic Outlook for 2016. The event was organised by the Malaysia External Trade Development Corporation.

He said currencies that are under pressure at the moment are the Colombian peso, Russian ruble and Norwegian krone, clearly due to the low oil prices.

South Afica's currency, rand, is also performing badly at present due to the low price of the commodity, while rising government debt was made worse by the recent sacking of the well-respected finance minister, he said.

In 2015, the ringgit depreciated by 18.5 per cent but it was not the worst-performing currency in the world. The local unit rebounded beginning October last year and then became one of the best traded currencies despite the challenging environment, Zulkifli said.

He said the ringgit, which is currently seeking its new equilibrium, was not expected to trade below 4.00 versus the greenback in the near term, given that the United States had raised its interest rate which would give support to its currency. However, the stronger dollar would have a negative effect on the world's largest economy. On the ringgit versus the Chinese yuan, he believed Malaysia's currency would perform better this year on the back of improved sentiment. Nevertheless, he did not expect the yuan to depreciate significantly considering its status as one of the world's reserve currencies, whereby the government would not allow the currency to drop so much. The other reserve currencies are the dollar, euro, pound sterling and yen.