KUALA LUMPUR (June 28): The ringgit opened broadly higher against the US dollar on Tuesday morning (June 28) as risk appetite for the local currency strengthened following the positive revision of Malaysia’s long-term sovereign credit ratings outlook by S&P Global Ratings (S&P).
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At 9am, the local currency had risen to 4.3960/4000 against the greenback from 4.4030/4060 at 6pm on Monday.
“This improvement (the positive revision) surely strengthened investors’ sentiment and confidence in Malaysia’s economy,” an analyst told Bernama.
In its latest report on Malaysia, S&P foresees the country’s gross domestic product (GDP) growth at 6.1% in 2022 and 5% in 2023.
The steady growth momentum is supported by high commodity prices, strong exports and domestic demand with the reopening of the economy.
Additionally, S&P affirmed the “A-” rating for long-term and “A-2” for short-term foreign currency sovereign credit ratings, as well as Malaysia’s “A” rating for long-term and “A-1” for short-term local currency ratings.
“The stable outlook reflects our expectations that Malaysia’s steady growth momentum and strong external position will remain in place over the next two years.
“At the same time, we anticipate that the policymaking environment will be supportive of restoring fiscal settings to a firmer footing,’’ the rating agency said in a statement.
On Monday, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz was reported as saying that the “stable” rating outlook was made as S&P believes the country is on a strong economic recovery path.
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He also said the GDP forecast of 6.1% is in line with the government’s expectations of higher growth over the subsequent quarters and in line with the higher end of Bank Negara Malaysia’s official estimate of 5.3%-6.3%.
In a note on Tuesday, MIDF Investment said the 2022 forecast and S&P’s optimistic view are in line with its projected outlook, where it expects Malaysia’s economic growth to average at 6% on the back of a strong external sector, elevated commodity prices and robust domestic demand.
“Even though there is the risk of a spike in food inflation, the overall price pressure will remain stable amid the current capped retail fuel prices for RON95 and diesel.
“As long as the average headline inflation does not surpass 3% year-on-year, we believe domestic spending will remain on an upward trajectory for this year and 2023,” it said.
Meanwhile, the ringgit was traded firmer against a basket of major currencies.
It appreciated versus the Singapore dollar to 3.1726/1760 from Monday’s close at 3.1779/1805, and rose against the Japanese yen to 3.2450/2482 from 3.2564/2589.
The local currency also strengthened against the British pound to 5.3952/4001 from 5.4064/4101 and advanced vis-a-vis the euro to 4.6501/6543 from 4.6535/6567.-BERNAMA