Summary Ringgit likely to stay weak in 2024 H1, but worst is over, Latest World News - The New Paper tnp.straitstimes.com
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The Malaysian ringgit is expected to remain weak in the first half of 2024 due to the influence of China and the strong US dollar, but analysts foresee a potential recovery driven by the prospect of US interest rate cuts and higher semiconductor sales.
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Key Points
- The ringgit is likely to remain weak in the first half of 2024 due to China's economic slump, a strong US dollar, and delayed economic reforms in Malaysia
- However, analysts believe the ringgit's plunge has bottomed out and it will gradually strengthen by the end of 2024
- The ringgit hit a 26-year low against the US dollar in February 2024, reaching RM4.7965, its weakest level since the 1998 Asian financial crisis
- Factors expected to drive the ringgit's recovery include potential interest rate cuts in the US, anticipated higher semiconductor sales, and the central bank's efforts to defend the currency
- Malaysia's trade surplus narrowed in January 2024 as imports grew faster than exports, leading to concerns about the demand for the ringgit and weakening investor sentiment
Summaries
26 word summary
Ringgit to stay weak in H1 2024 due to China, US dollar. But analysts see bottom, potential US rate cuts, higher chip sales to aid recovery.
51 word summary
The ringgit is expected to remain weak in H1 2024 due to China's slump and a strong US dollar. However, analysts believe the currency has bottomed out. Potential US rate cuts and higher semiconductor sales could drive gradual ringgit strengthening by year-end. The government may defend the ringgit and implement reforms.
113 word summary
The Malaysian ringgit is expected to remain weak in the first half of 2024, but analysts believe the currency's plunge has bottomed out. The ringgit's weakness is attributed to factors like China's economic slump and a strong US dollar. However, analysts are optimistic the ringgit will gradually strengthen by the end of the year, driven by potential US interest rate cuts and anticipated higher semiconductor sales. The government has indicated it could defend the ringgit and implement economic reforms to help stabilize the currency. While the ringgit may continue facing headwinds in the first half of 2024, the outlook is cautiously optimistic, with the currency expected to regain some strength by the year-end.
416 word summary
The Malaysian ringgit is expected to remain weak in the first half of 2024, but analysts believe the currency's plunge has bottomed out. The ringgit hit a 26-year low of RM4.7965 against the US dollar on February 20, 2024, its weakest level since the 1998 Asian financial crisis.
The ringgit's weakness is attributed to several factors, including China's economic slump, a strong US dollar, and delayed economic reforms in Malaysia. However, analysts are optimistic that the ringgit will gradually strengthen by the end of the year.
OCBC Bank currency strategist Christopher Wong believes the ringgit's weakness will be temporary and expects it to gradually strengthen to RM4.60 by the end of 2024. He predicts the currency will trade in the range of RM4.72 to RM4.76 against the US dollar in the first half of the year, with an average of RM4.71 for the whole year.
Malaysia's Second Finance Minister Amir Hamzah Azizan is slightly more optimistic, estimating that the ringgit will rise to RM4.50 against the US dollar by the end of the year, driven by higher economic growth of between 4% and 5%.
The ringgit's weakness since December 30, 2023, was triggered by a contraction in Malaysia's trade surplus as imports increased more than expected, while exports extended their weakening trend. Malaysia's trade surplus narrowed to RM10.12 billion in January 2024, compared to RM18.16 billion a year earlier, with imports growing faster than exports.
Analysts say the ringgit is expected to gradually strengthen by the end of the year, driven by potential interest rate cuts in the United States and anticipated higher semiconductor sales. Malaysia is the world's sixth-largest semiconductor exporter, with a global market share of about 7%.
The government has indicated that it could defend the ringgit and implement economic reforms, which should also help stabilize the currency. The central bank is prepared to sell US dollars from its reserves to restrict excessive weakness in the currency.
Despite the current challenges, analysts believe the worst is over for the ringgit. The currency's weakness is expected to be temporary, and it should gradually start to recover as the US Federal Reserve's interest rate cuts and China's economic rebound in the second half of 2024 provide more certainty and support for the Malaysian currency.
Overall, the outlook for the ringgit in 2024 is cautiously optimistic, with the currency expected to regain some of its strength by the end of the year, though it may continue to face headwinds in the first half of the year.