Currency Forecast - MYR: Continued Strength Ahead - MAR 2018

BMI View: The Malaysian ringgit continues to look technically bullish following the sustained break of resistance in December 2017. We hold a positive outlook on the currency and are upgrading our end-2018 forecast to MYR3.90/USD from MYR4.00/USD previously. We expect the currency's longer term appreciatory trend to remain intact amid an improving fiscal position, positive growth outlook, and still-undervalu ed real effective exchange rate .

Short-Term Outlook (three-to-six months)

The Malaysian ringgit remains on an appreciatory trend and continues to look bullish from a technical perspective, following the sustained break of short-term resistance at around MYR4.15/USD in December 2017. We expect the currency's broad trend to remain largely intact over the coming months. While we expect a degree of investor uncertainty in the run up to the general elections that must be held by August 2018 amid an increase in election-related rhetoric, this will be temporary and is unlikely to derail the MYR's appreciatory trajectory. Indeed, we note that the continued decline in Malaysia's 5-year credit default swap suggests that risk perceptions continue to fall, which should be supportive for the ringgit in the near term due to the strong correlation between the MYR and CDS spreads.

Technical Picture Remains Positive
Malaysia - Exchange Rate, MYR/USD
Source: BMI, Bloomberg

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