KUALA LUMPUR (Oct 19): The ringgit is forecast to trade in the range of 4.50 to 4.70 against the US dollar next year, following the announcement of recently tabled Budget 2024, according to RHB Research.

This is despite the local currency being under pressure currently — hitting an all-time low of 4.77 against the greenback on Thursday — with the positive carry on the greenback likely to widen against the ringgit by year end.

“We keep our forecasts for the US Federal Reserve to raise its federal funds rate to a range of 5.50% and 5.75% in its November policy meeting, with the balance of risks tilted towards seeing a hike only in December.

“Our proprietary inflation models across selected developed and Asean economies suggest that 'sticky' inflation is on the cards, on the back of higher commodity prices.

“This suggests that the US FOMC (Federal Open Market Committee) will likely stay hawkish into 4Q2023 (the fourth quarter of 2023), and possibly into 1Q2024, as inflation pressures heat up over the said period,” the research firm said.

Meanwhile, on the flip side, RHB Research said headwinds to the ringgit can be perceived from potential consolidation in the benchmark Brent crude oil price and higher Malaysia’s public debt in 2024.

It also expects some consolidation in Brent crude towards the second half of next year, assuming the easing of geopolitical tensions and relaxation of oil supply, following an extended period of high oil prices since July 2023.

Separately, on the recently announced Budget 2024, RHB Research pointed out that it views the budget as mildly expansionary, with substantial allocation for the development budget, with support for the priority sectors and targeted groups.

“We now see Malaysia’s gross domestic product (GDP) growth at 4.6%, with the balance of risks tilted to the upside, and we believe that the narrower fiscal deficit target of 4.3% of GDP in 2024 is a viable support for the ringgit in the coming year, as backed by our quantitative analysis,” it shared.