KUALA LUMPUR – Standard Chartered (StanChart) targets the ringgit to strengthen against the US dollar to 3.90 by year-end with an overweight recommendation on the domestic currency, reported Bernama.
Its head of ASEAN and South Asia forex research, Divya Devesh, said the ringgit would outperform the regional currencies in line with an improvement in global trade, recovery in commodity prices and a stronger Chinese yuan.
“We have already seen a recovery in global trade. Commodity prices have also recovered quite strongly and from what we observed during periods of recovery in global trade, the ringgit tended to perform quite strongly.
“Compared to other Asian counterparts, Malaysia has the highest correlation to global trade volume across Asia,” he told reporters during the virtual 2021 Global Outlook media briefing yesterday.
Divya said commodity prices had rallied, including those exported by Malaysia such as crude palm oil and liquefied natural gas, which should boost the country’s exports and the ringgit.
He noted that the ringgit was still significantly undervalued by 9.0% even at current levels.
Divya said foreign investors might adopt a wait-and-see approach amid the resurgence of COVID-19 cases in Malaysia and it did not lead to immediate outflows.
“We are still in an environment where the amount of negative yield-linked debt globally is close to US$17 trillion. And against the universe of increasingly negative yield-linked debt, Malaysia actually offers meaningful yield pick-up in nominal and real terms.
“Yes, there are some domestic concerns; but overall, investors are adopting a wait-and-watch stance for now,” he added.