KUALA LUMPUR, Jan 9 -- The ringgit is expected to strengthen further towards 4.00 versus the US dollar by end-2020, despite negative headwinds and near-term volatility.

RHB Research economist Ahmad Nazmi Idrus said the positive development coming from the US-China phase one trade deal and relative attractiveness of Malaysian assets would likely favour the currency’s appreciation.

“In addition, the weakness in US economic growth – as support from the corporate tax cut lapses – would likely cause the US Federal Reserve to ease rates further, weakening the US dollar,” he said in a research note today.

Meanwhile, AmBank Research chief economist and head of research Dr Anthony Dass also expects the ringgit to reach 4.00 by the end of this year against the US dollar from 4.11 in the first quarter of 2020 (1Q2020).

In a thematic global markets report today, he said that despite external headwinds and domestic issues, the ringgit closed stronger in 2019, up 1.1 per cent at 4.09 against the US dollar, while during the year (2019), the local note traded in a wide range with a high and low of 4.06 and 4.220.

“For the full year of 2019, the ringgit averaged at 4.14 with the end period at 4.09.

“For the ringgit to strengthen against the US dollar in 2020, it will also depend on the yuan, given that these two are closely correlated to the US dollar,” he said.

Dass said during the year, the yuan traded in a wide range with a high and low of 6.69 and 7.18, while for the full year of 2019, it averaged at 6.91 with the end period at 6.96.

“A weaker US dollar, stronger yuan, favourable domestic macro fundamentals, firm oil prices plus positive benefits from capital flows into this region point to a more favourable ringgit outlook. 

“Nevertheless, a play on the ringgit will be driven by several events like FTSE Russell retaining Malaysia in the World Government Bond Index during its next half-yearly review in March 2020, global rating agencies, the Fed ending the easing rate cycle thus providing room for BNM to institute one rate in the overnight policy rate, political transition and geopolitical tensions,” he added.

-- BERNAMA