KUALA LUMPUR: The ringgit outperformed most regional currencies in April despite depreciating one per cent month-on-month (MoM) against the US dollar.
The ringgit's improved performance against the currencies of Malaysia's main trading partners was reflected in MIDF Research's trade-weighted ringgit index, which jumped higher by 0.3 per cent MoM to 85.24 last month.
In particular, the local currency strengthened against the Japanese yen (up 0.2 per cent) and Indonesian rupiah (up 0.11 per cent).
"The yen depreciated after the Bank of Japan kept the interest rate steady in its April 2024 policy decision, as expected by the market consensus despite the yen's continued struggle against the greenback and other currencies," MIDF Research said.
"Meanwhile, the rupiah's depreciation caused Bank Indonesia to hike its policy interest rate to support the currency from weakening further," it added.
The ringgit also registered strong gains against the Philippines peso (up 1.6 per cent MoM) and Thai baht dollar (up 1.3 per cent MoM). It was also up by 1.6 per cent against the Korean won.
However, against the euro and pound, the ringgit fell by 0.5 per cent.
The ringgit fell one per cent MoM to RM4.773 against the greenback.
"The intra-month movement saw the ringgit plunging from its strongest closing on the first day of the month at RM4.731 towards the intra-month low at RM4.796 on April 16, as data releases signalled continued strength in the US domestic demand.
"Despite the depreciating pressure, the ringgit was yet to close at 26-year lows of RM4.805, which was recorded back in February. The ringgit recovered some losses, broadly appreciating towards the month's end albeit still hovering near the same level," it added.
Despite Malaysia's robust growth fundamentals supporting the ringgit outlook with domestic demand continuing to expand, expectations of the US Federal Reserve (Fed) future policy direction remained the main factor influencing fluctuations in the ringgit's exchange rate against the dollar.
Moving forward, the firm expects the ringgit and other regional currencies will benefit from the inflow of foreign funds into emerging markets, particularly when the Fed reduces its federal funds rate (FFR).
"However, given the smaller-than-anticipated FFR cuts and the recent sustained strength of the dollar, we predict a more modest appreciation of the ringgit than initially forecasted. We now anticipate the ringgit will average around RM4.53 in 2024 (2023: RM4.56) and trend towards RM4.43 by the end of the year (end-2023: RM4.59).
It added the anticipated recovery in Malaysia's external trade and a brighter economic outlook are poised to enhance the ringgit's performance this year, not only against the US dollar but also against the currencies of Malaysia's main trading partners.