The Ringgit depreciated -0.2%mom in Jun-24, closing at RM4.726 by the end of the month. On average course of the month, the Ringgit appreciated slightly by +0.1%mom to RM4.711.
MIDF Research (MIDF), in its June-24 Monthly Currency Review today said its MIDF Trade-Weighted Ringgit Index (TWRI) rose by +0.2%mom to 86.25 in Jun-24 signalling ringgit’s outperformance against currencies of Malaysia’s trading partners.
USD rebounded and strengthened in Jun-24. The US dollar closed Jun-24 stronger as the DXY dollar index soared +1.1%mom in Jun-24 to 105.87. The monthly average of the dollar index also rose by +0.2%mom to 105.17 (May-24: 104.95). The US dollar experienced a broad strengthening after closing at its intra-month low of 104.10 on 6 June 2024, which was the weakest level since Mar-24.
The subsequent rally of US dollar in the latter part of the month was underpinned by a series of encouraging economic releases, resulting in the dollar index peaking at 106.05 on 26 June 2024, the strongest level last seen in late Apr-24.
However, MIDF said the dollar’s strength subsided towards month’s end as moderating inflation and rising consumer pessimism led to more dovish rate-cut expectations.
USD broadly gained against other currencies. The US dollar continued to outperform all currencies as of Jun-24 with all currencies continued to depreciate year-to-date against the greenback.
The Japanese yen remained the worst performing currency, plunging -12.3%ytd following another -2.2%mom depreciation in Jun Ringgit reversed previous month’s gains. The Ringgit depreciated -0.2%mom in Jun-24, closing at RM4.726 by the end of the month.
On average, the Ringgit appreciated slightly by +0.1%mom to RM4.711. Early in the month, the Ringgit trended stronger, peaking at RM4.692 on 7th June 2024. It then swiftly plunged to its monthly low of RM4.723 on 10th June 2024, following renewed strength in the US dollar.
Subsequently, the Ringgit struggled to break below the RM4.70 level for the remainder of the month as economic resilience in the US economy supported the continued strength in US dollar.
Ringgit strengthened against trading partners’ currencies for the 5th consecutive month. On a broader perspective, MIDF TWRI rise signalled the ringgit’s outperformance against currencies of Malaysia’s trading partners.
Year-to-date, the index surged by +1.1%ytd. The rise in our MIDF TWRI was mainly underpinned by the ringgit’s gains against the Japanese yen (+10.3%ytd), the Korean won (+3.8%ytd) and the Thai baht (+3.8%ytd).
Ringgit gained against most currencies in Jun-24. As indicated by TWRI improvement, the ringgit appreciated against most regional currencies in Jun-24. Notably, the strong gains were recorded against the Japanese yen (+2.1%mom), Turkish lira (+1.5%mom) and Sri Lankan rupee (+1.3%mom).
The Ringgit also appreciated against major currencies i.e. the euro (+1.1%mom) and the pound sterling (+0.4%mom).
MIDF sees the Ringgit strengthening towards end-2024 as Fed moves closer to rate cuts.
MIDF anticipates the ringgit to appreciate going into the latter part of 2HCY24, and to close the year stronger at approximately RM4.43 (end-2023: RM4.59). The influx of foreign funds into emerging markets, particularly in light of the anticipated reduction of the Fed’s FFR, is expected to benefit regional currencies and the ringgit.
However, the sustained strength of the US dollar throughout the 1HCY24 has pushed the ringgit’s average weaker at RM4.73.
Consequently, MIDF recently revised their expectations for the ringgit’s 2024 average downward to RM4.64 (2023 average: RM4.56).
Despite their optimism for the ringgit’s appreciation in the latter part of 2024, they remain cautious of downside risks, primarily arising from external factors.
For instance, weaker growth in China and the US as well as the escalating geopolitical tensions could negatively impact Malaysia’s external trade recovery, thereby reducing support for the ringgit.
Furthermore, the extended strength of the US dollar, particularly if the Fed delays rate cuts further due to persistently high inflation or stronger-than-expected US economic growth, will also weaken the ringgit’s prospects to appreciate.
Upholding MIDF’s projection for the MIDF TWRI to close the year higher at 91.50. Despite the Ringgit’s depreciation against the US dollar, they expect the ringgit’s performance against other currencies in the MIDF TWRI index to largely remain positive.
The expected recovery in Malaysia’s external trade and an optimistic economic outlook are poised to bolster the ringgit’s performance this year.
In addition, elevated commodity prices would also drive increased demand for the ringgit. Furthermore, the ringgit will likely benefit from anticipated policy easing by major central banks; vis-à-vis BNM is expected to maintain the OPR at 3.00% this year.
Consequently, MIDF expects the MIDF TWRI will continue to reflect a broad appreciation of the ringgit, with the index to conclude the year higher at 91.50 (end-2023: 85.34).
