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Ringgit expected to recover by second half, this year

Publish date: Thu, 29 Feb 2024, 03:29 PM

KUALA LUMPUR: The undervalued ringgit which slid to a 26-year low against the US dollar is expected to recover in the second half of 2024 (2H 2024), the Dewan Rakyat heard today.

Finance Minister II Datuk Seri Amir Hamzah Azizan said this would be contributed by Malaysia's economic growth forecast of four to five per cent this year, which will facilitate the ringgit's recovery to RM4.50.

"Market analysts have estimated the ringgit to be undervalued between eight to 10 per cent. However, Malaysia's economic growth forecast of four to five per cent this year is expected to facilitate the ringgit's recovery against the US dollar to RM4.50," he said.

Amir Hamzah said this in response to a supplementary question from Lim Guan Eng (PH-Bagan) on whether the ringgit will reach a low of RM5 against the US dollar due to the significant depreciation of ringgit in 26 years.

Amir Hamzah also said that Bank Negara Malaysia (BNM) was also ready for foreign exchange intervention to curb excessive currency movements, such as selling US dollars from its reserves to restrict excessive weakness in the ringgit.

He also said the coordination between the ministry and the central bank, as well as joint collaboration with government-linked investment companies (GLICs) and government-linked companies (GLCs) could help increase the inflows into the foreign exchange market to strengthen the ringgit value.

"The central bank also monitors the conversion of export earnings into ringgit by exporting companies, in addition to continuing efforts to encourage the use of local currency for export settlements to reduce dependency.

"At the same time, the government also supervises overseas investments by private companies, including encouraging domestic investment prioritisation and delaying new overseas investments.

"Foreign investments should also be prudently managed, including hedging foreign currency exposure and bringing back returns from overseas investments to reduce the pressure on the ringgit," he said.

BNM governor Datuk Abdul Rasheed Ghaffour earlier this week said the ringgit was undervalued.

In a statement, he said that the ringgit ought to be traded higher given the country's positive economic fundamentals and prospects.

As of Feb 28, the ringgit value depreciated by 3.5 per cent against the US dollar, in tandem with other regional currencies namely Japanese yen (- 6.3 per cent), Thai baht (- 4.7 per cent) and the Korean won (- 3.3 per cent).

At 9am today, the ringgit edged up to 4.7620/7660 against the greenback compared with Wednesday's close of 4.7690/7730.

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