Ringgit to end at 3.00 by year-end: Kenanga

The ringgit is expected to settle at 3.00 against the US dollar by the end of the year as the currency's strength was dominantly supported by the domestic economy, says Kenanga Investment Bank Bhd.

However, most of the time the ringgit was at the mercy of external factors and would experience periods of volatility, it said.

"With Europe's debt crisis escalating and the end of US's second round of quantitative easing, we expect it would further exert downward pressure on currencies of export-driven emerging economies, including Malaysia.

"Furthermore, the strong ringgit is relative to the weakness of the US dollar which stems from its huge budget deficit as well as its mounting debt," Kenanga said in an economic outlook report released today.

It said with the US Federal Reserve expected to start raising interest rates the soonest in the first quarter of next year, the ringgit would remain volatile in the short-term, possibly hovering between 2.95 and 3.00 to the dollar.

Kenanga said Bank Negara Malaysia was expected to intervene because allowing the ringgit to strengthen too much would be detrimental to the country's competitive edge and derail its fragile growth momentum.

"In spite of being still undervalued, we believe that Bank Negara may likely intervene to ensure that the value of the ringgit would balance the need to enhance growth contributions from the external sector," it added.

Kenanga expects there would be a steady stream of portfolio capital flows amid a relatively healthy domestic economy, high interest rates and the equity market being one of the most laggard in the region. -- Bernama

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