Malaysian ringgit likely to continue depreciating until end-2017, says Scotiabank

The Malaysian ringgit has been under strong depreciation pressure against the US dollar because of a broader emerging markets sell-off, since the U.S. presidential election. The MYR has depreciated by more than 5 percent since 8 November. The Malaysian ringgit is sensitive to changes in international investors’ risk appetite because of relatively large foreign holdings of local currency government debt and Malaysia’s sizable share of short-term external debt.

In order to stabilize the Malaysian ringgit, the central bank has intervened in the foreign exchange market and implemented several measures that underpin the demand for the Malaysian ringgit, such as requiring exporters to convert 75 of their export proceeds into ringgit.

“We expect a gradual depreciating bias to persist, with the MYR closing 2017 at 4.48 versus the USD”, noted Scotiabank in a research report.

Meanwhile, the country’s sovereign credit outlook is stable. Standard & Poor’s and Fitch rate Malaysia’s credit in the “A-” category while Moody’s has assigned the country with an equivalent “A3” rating. Standard & Poor indicated recently that Malaysia’s solid external position and monetary flexibility would counter the nation’s relatively subdued public finances. Furthermore, the rating agency assessed that policymaking in the country would continue to be effective in spite of the political turmoil.