- The Ringgit currency was relatively weaker vis-à-vis most major currencies during the first week of November, driven by the outflow of foreign funds when the US Fed concluded its asset purchase program in October.

- However, economic conditions in the US may warrant the benchmark interest rate being kept low for a considerable time after the end of the asset purchase program.

- The Ringgit had depreciated against most major currencies during the start of November. By the end of last week, the Ringgit currency slipped by 1.7% from end-October to close at RM3.35 per USD on Friday.

- Aside from that, Ringgit fell against HKD (-1.8% from end-October), CNY (-1.6%), PHP (-1.4%), IDR (-1.1%), SGD (-0.8%), THB (-0.8%), GBP (-0.7%) and EUR (-0.3%).

- As such, purchasing power and imports could take a beating during the month of November due to the weak Ringgit currency. However, net trades will likely register a healthy surplus as a result of lower import orders.

- Note that despite the lacklustre global demand, Malaysia could potentially benefit in terms of inflows through trade on the back of the weaker-than-expected Ringgit currency.

- In September for instance, Ringgit closed at RM3.28 per USD (or -4.1% MoM). At end-August, Ringgit closed at RM3.15 per USD.

- Overall exports in September have continued to register a slow growth of 2.0% YoY vs. 1.7% in August. However, net trades were boosted to record a healthy surplus of RM9.3bil (August: RM3.86bil), owing to weak imports.

- Imports grew by 1.1% YoY in September, which was a slower growth pace than that of exports (August: +7.6%).

- Elsewhere, currency intervention by BNM was limited in October as the international reserves at BNM picked up during the month. Note that the Ringgit had declined by 0.3% to close at RM3.29 per USD as at end-October.

- The international reserves of BNM had amounted to USD128.1bil as at end-October (or +0.6% MoM). In Ringgit terms, the reserves at BNM increased by 0.7% MoM to RM419.7bil.

- In September, overall reserves fell by a hefty USD4.7bil (or -3.6% MoM) to USD127.3bil as BNM intervened in the forex market to ensure an orderly fluctuation of the Ringgit. The currency had experienced a drastic depreciation then.

- In terms of percentage of total outstanding MGS, the foreign holdings level had reduced to 46.9% in September from 47.3% in August.

- That said, upside catalyst for the strengthening of the Ringgit remains limited at this juncture. As a recap, BNM has maintained the benchmark interest rate at 3.25% during the monetary policy meeting on 6 November.

- As such, we are revising our year-end target for the Ringgit. We tweak our year-end target to RM3.35 per USD for 2014. For 2015, we expect the Ringgit to trade at averagely RM3.30 per USD, while our year-end target is RM3.25 per USD.

Source: AmeSecurities