MIDF Investment Bank (MIDF), in its latest economic report today (July 2, Tuesday), stated that the Ringgit has shown resilience, outperforming regional currencies in the first half of the calendar year 2024 (1HCY24).
MIDF highlighted that the US dollar closed stronger in June 2024, with the DXY dollar index rising by 1.1% month-on-month to 105.87. The Ringgit, however, depreciated slightly by 0.2% month-on-month, closing at RM4.726 by the end of June.
Despite the slight depreciation, the MIDF Trade-Weighted Ringgit Index (TWRI) increased by 0.2% month-on-month to 86.25, indicating the Ringgit's outperformance against the currencies of Malaysia's trading partners. MIDF projected that the Ringgit would appreciate in the latter part of 2HCY24, potentially closing the year at approximately RM4.43, up from RM4.59 at the end of 2023.
The report noted the USD's broad gains against other currencies in June 2024, with the Japanese yen being the worst performer, plunging 12.3% year-to-date. The Ringgit, despite a year-to-date depreciation of 2.6% against the USD, was the best-performing regional currency in 1HCY24.
The Ringgit reversed its previous month's gains, depreciating by 0.2% month-on-month in June 2024, although it had peaked at RM4.692 early in the month. The Ringgit struggled to break below the RM4.70 level due to the continued strength of the USD, which was bolstered by the US economy's resilience.
The MIDF TWRI indicated that the Ringgit strengthened against the currencies of Malaysia's trading partners for the fifth consecutive month, rising by 1.1% year-to-date. Notable gains were recorded against the Japanese yen, the Korean won, and the Thai baht.
The Ringgit also appreciated against most regional and major currencies in June 2024, including the Japanese yen, Turkish lira, and Sri Lankan rupee, as well as the euro and the pound sterling. Despite this, foreign investors net sold USD12.61 million of Malaysian equities in June 2024, although foreign holdings of Malaysian bonds continued to rise.
MIDF anticipated the Ringgit to strengthen towards the end of 2024 as the US Federal Reserve moves closer to rate cuts. The influx of foreign funds into emerging markets, coupled with the anticipated reduction of the Fed's Federal Funds Rate (FFR), is expected to benefit regional currencies and the Ringgit. However, external factors such as weaker growth in China and the US, along with escalating geopolitical tensions, could pose risks.
MIDF upheld its projection for the MIDF TWRI to close the year higher at 91.50, supported by the expected recovery in Malaysia's external trade, an optimistic economic outlook, and elevated commodity prices. The Ringgit is also likely to benefit from anticipated policy easing by major central banks, with Bank Negara Malaysia expected to maintain the Overnight Policy Rate at 3.00% this year.
Investors should monitor these developments closely as the Ringgit's performance is poised to remain positive against other currencies in the MIDF TWRI index, reflecting a broad appreciation throughout 2024.