KUALA LUMPUR: Standard Chartered Bank has placed an “overweight” foreign exchange (FX) weightings on the ringgit, saying the currency was among the most undervalued emerging market currencies.
In its Global Research 4Q 2017 report, the bank also said that the overall positioning for the currency among foreign investors remained extremely light.
“More importantly, the ringgit sentiment onshore has improved with better US dollar supply dynamics.
“We have short- and medium-term ‘overweight’ foreign exchange (FX) weightings on the ringgit,” it said.
Standard Chartered said the ringgit’s onshore FX turnover was well off its late 2015 lows.
At the same time, onshore foreign-currency deposits had turned a corner, it said, adding, the ringgit had also benefited from Malaysia’s strong linkage to the global supply chain, amid robust global export volumes.
The Malaysian currency had suffered in 2016, having depreciated by 4.53 per cent to end the year at 4.4845/4875 against the US dollar, compared with the 4.2900/2970 registered end-2015.
The currency retreated over fears of a global recession, falling crude oil prices, anticipation of normalisation of interest rates in the United States (US) and concerns over China’s economy.
In the first quarter of 2017, the ringgit had stabilised and appreciated by 1.3 per cent amid the broad weakening of the greenback on the back of uncertainties on the direction and implication of policies in the US.
The momentum continued in the second quarter, which saw the ringgit rising by 3.1 per cent between April and June, making it the best performing currency in the Asian region during the quarter.
The local unit was well supported by the continued weakness in the greenback, coupled with the further liberalisation of the bond market and FX hedging requirements as announced by Bank Negara Malaysia’s Financial Markets Committee. — Bernama