KUALA LUMPUR, Sept 26 — Malaysia’s currency has grown stronger and is showing further signs of improving in the next three to 24 months against the US dollar amid a decline to perceptions of its credit default swap (CDS) risks, according to Business Monitor International (BMI) Research.

In a report today, the unit of the Fitch Group noted that the ringgit has strengthened by 9.3 per cent year-on-year since January following the break of a trendline resistance at 4.32 to the greenback and expects the ringgit will appreciate further next year to 4.15.

"Given the strong correlation between the MYR and CDS spreads, this should support the ringgit in the near term, with the CDS spread having reached multi-year lows,” it said in its report.

BMI also maintained its positive outlook on the government’s fiscal position, noting there is "extremely low” risk of Malaysia defaulting on its credit as the political situation is stabilising with Prime Minister Datuk Seri Najib Razak fully in control ahead of the 14th general election.

"Indeed, the government remains committed to fiscal consolidation and we view the revisions to the tourism tax as a sign of its flexibility,” it said, despite noting there will be a smaller revenue amount of RM210 million, after government made a revision to impose the tax only on foreigners.

But BMI also noted the government's plans to tighten its Goods and Services Tax collection by taxing overseas-based digital service providers, and said this will help add another RM42 billion to the Treasury’s coffers if the proposal is passed in Parliament and successfully implemented.

It said Malaysia's real effective exchange rate "remains cheap by historical standards” despite having appreciated by 5.5 per cent year-on-year since January and added that this will help improve the country’s competitiveness in the medium term.

BMI said its risks to the Malaysian forecast has been weighted on the downside.

It warned that the ringgit could see higher than expected outflows if the US Federal Reserve raised interest rates at a faster-than-expected pace.

It also warned that the Donald Trump presidency of the US government raises the probability of a global trade slowdown, adding that additional protectionist measures would be not be good for Malaysia’s export.