KUALA LUMPUR (Aug 2): After strengthening beyond the RM4.60 mark, MIDF Research foresees the ringgit appreciating further in the second half of 2024, potentially ending the year at RM4.43 (end-2023: RM4.59).
According to the research house, the return of foreign funds into emerging markets, driven by an anticipated reduction in the Federal Reserve's (Fed) federal funds rate and narrowing interest differentials, is expected to bolster regional currencies, including the ringgit.
“However, due to the prolonged strength of the US dollar, we estimate ringgit will be averaging higher this year at RM4.64 (2023 average: RM4.56),” it said in a note on Friday.
"We remain vigilant of potential downside risks, particularly from external factors," MIDF Research added.
MIDF Research said the weaker growth in China and the US could adversely affect Malaysia’s external trade recovery, thereby diminishing support for the ringgit.
Additionally, escalating geopolitical tensions pose a threat to the currency's stability.
The sustained strength of the US dollar, especially if the Fed delays rate cuts due to persistently high inflation or stronger-than-expected US economic growth, will further challenge the ringgit's appreciation prospects.