KUALA LUMPUR: AmResearch is maintaining its forecast for the ringgit to trade against the US dollar at RM4.10 to RM4.15 for this year and between RM4.05 and RM4.10 for 2022.

       “Over the long term, we continue to believe that the ringgit would benefit from a weaker US dollar and could touch RM4.15, which is stronger than the mid-point of its long-term trading range (RM3.80 to RM4.50),” it said on Wednesday.

       In a research note, it said that it expects the ringgit to strengthen by 0.2% to 0.5% against the US dollar.

       AmResearch pointed out the factors which could impact the ringgit are the Covid-19 pandemic uncertainties, coupled with the management, the speed of vaccination rollout, and the eventual reopening of the economy, external demand’s strength and domestic political challenges.

       In the short term, it expects the ringgit to weaken significantly partly on concerns over Covid-19 cases and the management of the pandemic.

       The outbreak of this pandemic now defined as the “third wave”, lockdown measures and the EMCO in certain states are posing significant challenges to the economy and political space.

       The effects of these challenges to the economy and political outlook over the short term are also seen to have spilled over into the social environment.

       It will certainly weigh on the ringgit over the coming months although the government has rolled out another RM150bil under the National People’s Well-Being and Economic Recovery Package (Pemulih), bringing the total stimulus to RM530bil or 37% of GDP.

       Stimulus measures rolled out by the government as at July 2021. Source: MoF and AmResearch

       AmResearch said the ringgit will need to cope with periodic appreciation of the US dollar driven by positive news from the economic data that will influence the tone of the US Fed Reserve in relation to its tapering and potential rate hikes

       Another factor, it said was the movements in the global crude oil price, that is Brent.

       On the outlook for the economy, it maintained its 2021 GDP projection at 4% to 4.5% with the downside at 3.0%, reflecting a much weaker recovery from the 5.6% contraction in 2020 due to a much weaker private consumption and investment outlook

       As for the Overnight Policy Rate, AmResearch’s base case suggests Bank Negara Malaysia will likely keep the policy rate unchanged at 1.75%.

       “However, there are possibilities for the government to raise the debt limit from 60% to as high as 65% to fund higher counter-cyclical spending. Under such circumstances, a cut to the OPR by 25 basis points (bps) to 1.5% could take place,” it said.