Ringgit to Soar: Experts Predict 4.40 by Year-End - What This Means for Your Money

KUALA LUMPUR: In a promising turn of events for the Malaysian economy, Kenanga Investment Bank Bhd (Kenanga IB) has forecasted that the ringgit is likely to strengthen and trade closer to the 4.40 level by the end of the year. This optimistic prediction is rooted in the anticipated actions of the United States (US) Federal Reserve (Fed), which is expected to implement a rate cut of 50-75 basis points (bps) in 2023.

According to Kenanga IB, the potential Fed rate cut is a crucial factor influencing the ringgit's performance. A decrease in interest rates by the Fed would lead to a reduced appeal of the US dollar, causing it to depreciate relative to other currencies, including the Malaysian ringgit. This depreciation would subsequently drive up the value of the ringgit, pushing it closer to the 4.40 threshold.

The potential rate cut by the Fed is largely driven by slowing economic growth in the United States. As inflation concerns begin to subside and economic expansion slows, the Fed is likely to re-evaluate its monetary policy stance. By cutting interest rates, the central bank aims to inject liquidity into the economy and stimulate growth.

A stronger ringgit would have far-reaching implications for Malaysia's economy. For one, it would increase the purchasing power of Malaysians, enabling them to buy more goods and services both locally and internationally. This, in turn, would boost consumer spending and contribute to economic growth.

A stronger ringgit would also make Malaysian exports more competitive in the global market. As the currency strengthens, the prices of Malaysian exports would become more attractive to foreign buyers, potentially leading to increased demand and revenue for local businesses.

On the other hand, a stronger ringgit might make imports cheaper for Malaysia, which could lead to increased consumption of foreign goods. This could potentially lead to a trade deficit if exports do not keep pace with imports.

While the forecast by Kenanga IB is certainly positive, it is essential to acknowledge that currency markets can be unpredictable and are influenced by a multitude of factors. The ringgit's performance can be affected by a range of factors, including economic indicators, policy decisions, and global events.

Nonetheless, the expected strengthening of the ringgit is a welcome development for Malaysia's economy. As the country continues to navigate the complexities of the global economic landscape, a robust currency would undoubtedly serve as a valuable asset in promoting economic growth and stability.