KUALA LUMPUR: The ringgit is expected to appreciate to RM2.95 against the US dollar by year-end on expectation that Malaysia’s international reserves will continue to improve.
HIGH VALUE: Economists expect the ringgit to appreciate to RM2.95 against the US dollar by year-end 2013 on expectation that Malaysia’s international reserves will continue to improve.
The currency closed at RM3.05 per dollar last year.
Expressing optimism, Alliance Research economist Manokaran Mottain said international reserves could hit US$150 billion by end-2013.
Bank Negara Malaysia (BNM) international reserves ended the year at US$139.7 billion on December 31, 2012 against US$139.2 billion recorded on December 14, 2012.
Manokaran said the increase was largely attributed to continued inflow of foreign direct investment and portfolio funds into the economy, given the favourable positive interest rate differential, which stood at a record 290 basis points.
“On the other hand, resilient economic outlook and steady interest rate expectations could have also contributed to increased foreign investors’ participation, especially in the bond market,” he said in a note yesterday.
Manokaran said reserves also rose due to surpluses from export activities over the last three months.
“As a result of increasing funds flowing into the system, we estimate excess liquidity in the banking system to remains abundant at about RM295 billion on December 31,” he said.
Meanwhile, RAM Holdings Bhd (RAM) group chief economist Dr Yeah Kim Leng said international reserves would continue to increase at a steady pace this year, underpinned by both direct and foreign capital inflow, as well as, continuous trade surpluses.
“The international reserves is at healthy level and it will strengthen the currency market,” he told Bernama.
High international reserves was one factor that would underpin the strength of ringgit, said Yeah, adding that the local unit was likely to hover between RM2.90 and RM2.95 over the next 11 months.