As the ringgit strengthened further beyond the RM4.60 mark, MIDF foresees the ringgit would appreciate further in 2HCY24 and end the year at RM4.43 (end-2023: RM4.59).
The return of foreign funds into emerging markets, particularly in light of the anticipated reduction of the Fed's FFR and the narrowing interest differentials, is expected to support 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). While we are optimistic about the ringgit's appreciation in the latter part of 2024, the house said it remains vigilant of potential downside risks, particularly from external factors.
For example, weaker growth in US and the escalating geopolitical tensions could adversely affect Malaysia's externaltrade recovery, thereby diminishing support for the ringgit. Furthermore, the sustained strength of the USD, especially if the Fed delays rate cuts possibly due to persistently elevated inflation or stronger-than-expected US economic growth, will also impair the ringgit's appreciation prospects.