PETALING JAYA: The ringgit’s uptrend against the US dollar is expected to continue in tandem with the US interest rate cutting cycle, says an economist.

Sunway University’s Prof Dr Yeah Kim Leng said the ringgit’s strengthening against other currencies would depend on how well the Malaysian economy held up relative to other economies in weathering a potential global slowdown.

“The ringgit’s upside potential could also derive from the success of its (Malaysia’s) restructuring efforts to reduce the fiscal deficit, lower debt and move the economy up the value chain by attracting technology-intensive foreign and local investments,” he said.

Prof Yeah said a stronger ringgit would lower the cost of servicing foreign currency-denominated debts, enhancing Malaysians’ purchasing power to travel, study or invest abroad.

“The construction, infrastructure, oil and gas, and manufacturing industries – particularly those that rely on imported raw materials, intermediate inputs and capital goods – will benefit from the ringgit strengthening.

“The people can also expect imported food prices to ease with a stronger ringgit,” he added.

On the Black Monday incident, he said the underlying causes, timeliness and appropriateness of policy responses were of greater concern for Malaysia’s economy.

On Monday, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell to 1,532.24 points from last Friday’s close of 1,611.05 before rebounding slightly at the end of the day to 1,536.48, still down 4.6%.

Prof Yeah said that while a US recession would result in lower demand, Malaysia’s exporters would need to look at diversifying to other markets and other strategies to ride through a global slowdown, particularly if the Chinese, Indian and European economies could not pick up the slack.

Recently, the ringgit rebounded and steadily rose to around RM4.50 against the US dollar.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said Malaysia, being an economy open to trade and investment, would be affected if the US economy fell into recession.He also said Malaysia had some degree of policy space to respond accordingly if the global growth trajectory went south.

“More inflows from foreign investors, be it in the form of portfolio investments or real estate sectors, would help the country’s capital market become more lively and create more jobs for locals,” he added.

Economist Assoc Prof Dr Ahmed Razman Abdul Latiff said the country’s economy would remain strong and the FBM KLCI performance this year still recorded more than 7% growth despite the Black Monday incident.

“The ringgit may hover at new levels for the next few days and the government should continue to support its domestic economy and explore new markets for its products and services.

“It is important that Malaysia seizes this window of opportunity to continue with the necessary structural reforms.

“This will help strengthen our economic competitiveness and lend greater support to the ringgit,” said the Putra Business School’s MBA Administration programmes director.

https://www.thestar.com.my/news/nation/2024/08/07/ringgit-has-room-to-strengthen-further