-  Malaysia’s forex reserves at Bank Negara Malaysia (BNM) inched up slightly during the 1H of June. Overall reserves stood at USD131.1bil in mid-June (or +0.2% from end-May).

-  As of YTD 1H June 2014, total reserves slipped by 2.8% in USD terms or USD3.8bil. In Ringgit terms, forex reserves stood at RM427.6bil (or -3.2% YTD).

-  At the close of 13 June, Ringgit stood at RM3.2185 per USD. On average, Ringgit hovered at 3.27 per USD as at YTD mid-June.

-  Note that the Ringgit was generally weaker against regional currencies during the 1H of June. Ringgit fell by a marginal 0.2% against the Greenback during the 1H of June but strengthened by 1.7% YTD.

-  Aside from the slight depreciation vs. USD, Ringgit fell against GBP (-1.7% from end-May), THB (-1.5%), AUD (-1.2%), CNY (-0.8%), and SGD (-0.6%).

-  However, Ringgit was unchanged vis-à-vis PHP and JPY but was stronger against the IDR (+0.7%) and EUR (+0.1%) during the 1H of June.

-  The reserves position is sufficient to finance 9.1 months of retained imports and is 1.3 times the short-term external debt.

-  We continue to expect BNM to maintain a healthy reserves level amidst the anticipation of a stronger Ringgit going forward.

-  Note that the Ringgit closed at 3.2235 against the Greenback on Friday, which was 0.3% lower than the previous day’s close.

-  Despite the slight depreciation in the 1H of June, Ringgit will potentially stay strong on the back of an anticipated upward adjustment in interest rate during 2H14.

-  Our year-end assumption for the Ringgit is RM3.20 per USD while OPR is expected to rise to 3.25% by end-2014. 

Source: AmeSecurities