The Malaysian ringgit continued to weaken for a second consecutive month. Economists at MUFG Bank expect the USD/MYR to trend lower towards 4.30 by end-2022.

MYR vulnerable as markets worry about higher interest rates and economic slowdown

“The currency is primarily weighed down by concerns over higher global interest rates and the risk of a general economic slowdown in major economies. Market participants fear that higher interest rates will cause a global recession, which will likely dampen commodity prices and demand for Malaysia’s exports.” 

“BNM’s policy rate hike has set expectations towards normalization. We forecast a 25 bp rate hike each quarter, bringing the OPR to 3.00% by the end of June 2023.”

“We forecast USD/MYR at 4.35 at the end of June, moving lower to 4.30 at the end of the year and then 4.28 by end-March 2023. Those forecasts are partly premised on our view of some USD weakness as Malaysia’s interest rate differentials with the US narrow in the coming year.”