KUALA LUMPUR, Jan 22 — Despite being undervalued, there is little catalyst for the Malaysian Ringgit (MYR) to recover, observed Standard Chartered Head of ASA FX Research Divya Devesh.
In a media briefing today, Divya said that global growth has slowed down and due to its weaker demand and Malaysia's position as a small open economy, the nation's exports will not be strong.
China's own economic slowdown due to its trade dispute with the US will also contribute to MYR's undervalued and neutral position.
"Global growth has slowed down or it has already peaked. Global demand is getting weaker and Malaysia is a small, open economy. Our exports this year won't be very strong when the global economy and China is slowing down.
"I also don't see commodity prices moving higher - like crude palm oil and liquid natural gas. They have been rather low and I've not seen a big rally. That's likely to keep current account surplus at relatively low levels," said Divya.
He also pointed out that despite Malaysia having an account surplus unlike other nations with current account deficiency, the surplus has deteriorated.
Divya also said that investment portfolios inflows have been soft and the numbers have remained quite low since 2013 which is also one of the factors constraining the ringgit.
"But there are some positive factors, more about trading against the dollar. A weaker Ringgit to the dollar is a positive factor to the Ringgit. We see a lot of cross currents for the MYR in 2019 and this will probably translate into more range bound trading environment for the dollar-ringgit," he said.
He forecasted the US-MYR at 4.25 in mid-2019 and 4.3 at end of year.
