At 9.12 am(0112 gmt), the local unit was quoted at 4.4230/4280 against last Friday's 4.4230/4280 at 6pm on Friday.
KUALA LUMPUR: AmInvestment Research is maintaining its positive view on the ringgit due to six factors which include the stronger economic growth, healthy inflow of foreign funds into the equities market and easing inflation pressure.
It said on Tuesday its positive outlook was firstly, the better-than-expected 1Q and 2Q GDP growth of 5.5% and 5.8%.
The higher GDP growth has prompted it to revise upwards its full year 2017 GDP to between 5.7% and 5.9% supported by strong exports and complement with domestic activities;
Secondly, it also noted the healthy inflow of funds into the equity market with net inflow year-to-date around RM10.7bil after registering net outflow for three consecutive years while foreign holdings in Malaysian Government Securities (MGS) at 40.32% which is equivalent to RM150.9bil.
Thirdly, it expects inflation pressure to ease in 2H2017 to average around 3.0%-3.3% from 4.1% in 1H2017 bringing the full year average to around 3.5%-3.7% as a result of lower cost push pressures with a more stable fuel price.
Fourthly, the research house envisages the current negative real returns could potentially fade away with the Overnight Policy Rate expected to stay unchanged at 3% as inflation pressure eases.
“Still we maintain a 45% chance for a rate hike by 25bps in 4Q2017 should demand pull inflation picks up strongly while supporting GDP,” it said.
Fifthly, the onshore sentiments on the ringgit has improved supported with strong external reserves which has surpassed the US$100bil mark, now is at US$100.5bil.
As for the sixth factor, it expects the continued weakening pressure on the US dollar index (DXY) index due to the ongoing sentiments in the US. We expect the DXY index to be around 90-91 in 2017.
The DXY is an index (or measure) of the value of the dollar relative to a basket of foreign currencies.
“From our estimates, it shows more room for the ringgit to strengthen. Our fair value for the ringgit is around 3.95 against the US$. However, our year-end target for ringgit is 4.12 while our full year average is 4.31.to 4.33,” it said.
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