KUALA LUMPUR,July 8 ― RHB Investment Bank Bhd expects the ringgit to trade at 4.35 against the US dollar by end-2020 after Bank Negara Malaysia (BNM) cut the Overnight Policy Rate (OPR) by 25 basis points (bps) to 1.75 per cent yesterday.
The central bank has cut the OPR four times totalling 125bps since the beginning of the year.
In a note today, economist Ahmad Nazmi Idrus said BNM’s recent rate cut should put less pressure on the currency to rise.
“In addition, the risk of a second round of Covid-19 infections remains high, in view of what countries have experienced.
“If it does happen, we may see the return of a strong US dollar, as investors prefer more liquid assets,” he said.
However, Ahmad Nazmi noted that the ringgit increased slightly to 4.29 against the US dollar in June 2020 from 4.35 in the previous month.
“The currency clawed back some of the losses amid improved sentiment following the reopening of the economy, as well as on the general weakness of the greenback,” he said.
On BNM's international reserves which amounted to US$103.4 billion (RM442.35 billion) as at June 30, 2020 versus US$102.9 billion as at May 29, 2020, Ahmad Nazmi said the central bank's reserves continued to rise, although the improvement in the import cover ratio was largely due to falling demand for imports.
“The appreciation of the currency was also partly due to an increase in Covid-19 infections, especially in the US, complemented by better conditions domestically,” he said, adding that a recovery of the local currency is underway although the economic condition remains fragile.
At 9.05am, the local unit was traded lower at 4.2800/2860 against the greenback from yesterday's close of 4.2750/2800. ― Bernama
