KUALA LUMPUR (Dec 7): Rakuten Trade Research foresees the ringgit (MYR) to strengthen to the range of 3.80 to 3.90 against the US dollar (USD) in 2021 as it expects Chinese yuan (renminbi or RMB) sentiment to improve against the greenback's.
The research house’s head of research Kenny Yee said in a briefing he envisages the new US administration to be less volatile next year, hence expecting regional currencies to strengthen against the US dollar.
“We expect China to lead Asia as the new US administration is seen as a better business partner than Trump’s.
“As the MYR/USD movement is the closest with RMB/USD, we foresee the MYR to strengthen against the USD to possibly the 3.80/90 levels in 2021,” he said.
Yee also said he foresees the potential inflow of foreign funds to Malaysia to drive demand for ringgit.
He opined that the foreign fund flow next year would improve as foreign shareholdings were already at an all-time low of below 12% as at end-November.
"The remaining foreign shareholdings on Bursa Malaysia display low possibility of another massive net foreign outflow. Therefore, the propensity of a net foreign inflow in 2021 is high," he said.
On Fitch Ratings' lowering of its rating of Malaysia, he currently does not expect this have a significant impact on the foreign inflow.
“Unless S&P Global Ratings and Moody's Investors Service follow suit. I assume that the impact is not that high now,” he said.
Fitch Ratings last Thursday downgraded Malaysia's long-term foreign-currency issuer default rating to "BBB+" from "A-", with a "stable" outlook.
According to Rakuten, the ringgit has so far strengthened 9.6% to around 4.06 to the US dollar from a year's low of 4.45.