KUALA LUMPUR (Jan 14): The ringgit is expected to come under pressure against the US dollar, following Donald Trump's return to the White House and a slowdown in China's economy, according to Maybank Investment Bank.
In a virtual 2025 market outlook briefing on Tuesday, Maybank's head of foreign exchange research Saktiandi Supaat predicted that the ringgit will weaken to RM4.70 against the US dollar by the second quarter of this year, before recovering to RM4.45 by the end of the year.
The ringgit was impacted by Trump's election victory due to Malaysia's significant export exposure, making it vulnerable to tariffs that the incoming president has promised to raise on goods going into the US.
The currency weakened in line with regional peers and depreciated 2.75% against the US dollar between Nov 4, 2024, and Jan 10, 2025.
The ringgit is also sensitive to the yuan due to Malaysia's substantial export exposure to China. The yuan could potentially lag behind peers due to the risk of tariffs as Trump returns, Saktiandi warned.
There are, however, three factors that could support the ringgit, according to Saktiandi. They are:
- Interest rate stability: Bank Negara Malaysia is likely to keep interest rates on hold at 3%, preventing yield differentials from weighing too much on the ringgit.
- Robust economic growth: Malaysia's economic growth is anticipated to remain robust, bolstering investor sentiment and supported by an investment upcycle.
- Fiscal consolidation: The government's commitment to a fiscal consolidation path is likely to instil confidence in Malaysia's bonds.
At the time of writing on Tuesday, the local note had appreciated 0.22% and was traded at 4.4980 against the US dollar. Over the past year, the ringgit has recovered 3.2%.
The ringgit also strengthened 0.19% to RM3.2879 against the Singapore dollar on Tuesday. In the past year, it has risen 5.7% against the Singapore dollar.