THE outlook for ringgit in 2022 continues to be challenged by a combination of external and internal factors that will strongly influence its movement.

       One possibility that cannot be ruled out is for the ringgit to remain slightly on the weaker end of its long-term trading range between RM3.80 and RM4.50 against the US dollar next year.

       Economists generally opine that the full-year average for the ringgit against the US greenback will fall between RM4.20 and RM4.30 in 2022 compared with the estimated range of RM4.10-RM4.20 in 2021.

       The local currency started 2021 at RM4.09 against the US dollar and briefly strengthened to RM4.01 on Jan 4 and thereafter weakened to reach a low of RM4.24 on Aug 11.

       Since then, the ringgit has been hovering around RM4.14 to RM4.23 levels. Year-to-date, the local currency performance against the US dollar has fallen by 5.3% to RM4.23.And compared to its regional peers, the ringgit is currently among the worst performers after the Vietnamese dong, Indonesian rupiah, Singapore dollar and the Philippine peso this year.

       However, expectations for the domestic economy to remain open for a larger part of the year in 2022, stronger crude oil prices and the appreciation of the Chinese yuan also helps to limit the selling pressure on the ringgit currently.

       According to AmBank Group chief economist and member of the Economic Action Council Secretariat Anthony Dass, the selling pressure on the ringgit is expected to remain in 2022.

       According to AmBank Group chief economist and member of the Economic Action Council Secretariat Anthony Dass, the selling pressure on the ringgit is expected to remain in 2022.

       On the global front, factors influencing the ringgit include the hawkish tone of the global central banks, rising uncertainties on the potential new virus variants and the efficacy of the vaccines, China’s yuan direction against the US dollar, the global oil price movement, geopolitical issues and the political issues such as the US mid-term election.

       In Malaysia, the focus will be on the speed of the economic recovery, the implementation and outcome of Budget 2022 as well as the 12th Malaysia Plan and other blueprints that have been unveiled.

       Dass adds: “Another concern for Malaysia next year is the financial strains once the stimulus measures ends.

       “The focus is on the non-performing loans, bankruptcies, delinquencies and unanticipated shocks, fiscal and public debt management.”

       Despite the projected slight weakening trend of the ringgit, Dass believes that the local currency is likely to settle at a more stable scenario in 2022 compared with 2020 and 2021.

       By the second half of 2022, he envisaged that Malaysia will be able to handle the pandemic better or have an effective way to manage Covid-19 and the economy should be improving moderately.

       “On that note, we should see the ringgit averaging slightly stronger at RM4.10 against the US dollar in the second half of 2022,” Dass points out.

       Socio-Economic Research Centre executive director Lee Heng Guie, meanwhile, envisages that the short-term outlook for the ringgit is expected to remain weak against the US dollar.

       Socio-Economic Research Centre executive director Lee Heng Guie, meanwhile, envisages that the short-term outlook for the ringgit is expected to remain weak against the US dollar.

       This will be weighed down by concerns over the emergence of Omicron variant, which will temper the prospect of domestic economic recovery amid rising inflation risk.

       He also notes that the timing for the normalising of the interest rates by Bank Negara is important.

       “This will help to balance between ensuring a firmer economic revival and taming the higher inflation expectations, which will influence the movement of the ringgit, at least in the first half-year of 2022.

       “In addition, the ringgit is also being challenged by the US Fed’s hawkish tilts to contain growing inflation risk.

       “Meanwhile, the eventual unwinding of asset purchases, followed by sooner-than-expected rate hikes in 2022, will lift up the dollar’s strength against the ringgit,” explains Lee.

       “We expect the ringgit to average around RM4.25 against the US dollar in the first half of 2022 before improving slightly to RM4.20 by end- December 2022, almost the same level of the estimated RM4.22 by end-December 2021,” he adds.

       Therefore, the government will need to continue enhancing the economy and financial resilience to lift the strength of the ringgit against major foreign currencies.

       These will include maintaining a sustainable economic growth by rebuilding Malaysia’s fiscal position in containing the debt level, enhancing the competitive investment climate and providing a clear, stable and certain policy landscape to attract the inflows of long-term capital and portfolio investment into domestic equity and bond markets.