KUALA LUMPUR: The ringgit is likely to rise to RM3.80 against the United States (US) dollar at the at the end of this year if the current positive momentum continues, driven by a potential further reduction in interest rates by the US central bank, analysts said.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said if the current momentum can be maintained and US interest rates slashed further, it is possible that the local currency reach RM3.80 per dollar by the end of this year.
He said that looking at the average value of the ringgit since its peg was abolished on July 21, 2005, until now, the value is RM3.7893.
Therefore, he said, it can be assumed the currency's value is still undervalued from that point of view.
"The more aggressive US interest rates cut, the stronger the value of ringgit," he told Berita Harian in commenting on the possibility of ringgit advanced to RM3.80 by end-2024.
Meanwhile, SPI Asset Management managing director Stephen Innes said ringgit can reach RM4 per dollar while needing two major external factors to push it to RM3.80 level.
He noted that the two factors include slower US economic growth and a real recovery in China's real estate market.
Without those two factors, he said it will be an uncertain journey for Ringgit.
"The movement of ringgit will largely depend on two catalysts, namely whether the US remains slow in growth and if China's stimulus efforts reinvigorate its real estate market.
"The ringgit's rise has surpassed the US dollar yield differential against the ringgit that would normally be suggested, benefiting from the strong performance of commodity exporters, especially after China's stimulus provided much-needed support to commodities," he said.
Innes added that the US Federal Reserve's (Fed) plan to cut rates until 2025 could mean that the recovery of the US dollar may not be long.
"As China's stimulus starts to wane, we could see the ringgit potentially lose more of its upside. However, it still looks like it's a buy-on decline," he said.