Fading Ringgit Rally May Resume in 2011, Morgan Stanley Says
August 27, 2010, 3:39 AM EDT
By David Yong
Aug. 27 (Bloomberg) -- Malaysia’s ringgit is headed for a period of consolidation as technical indicators signal this year’s market-leading rally may be running out of steam, according to Morgan Stanley.
The currency has strengthened 9 percent in 2010 and reached a 13-year high of 3.1238 per dollar on Aug. 23, Asia’s best performance excluding the yen. Malaysia’s economy expanded 8.9 percent last quarter, following growth of 10.1 percent in the first three months, the best quarters in a decade.
“The ringgit momentum may be close to exhaustion after moving so quickly,” Hong Kong-based strategists Stewart Newnham and Yee Wai Chong from the U.S. bank, wrote in a research report today. “We therefore expect dollar-ringgit to enter a period of consolidation before heading lower in 2011.”
The ringgit declined 0.1 percent to 3.1427 per dollar as of 2:59 p.m. in Kuala Lumpur, from 3.1410 a week ago, according to data compiled by Bloomberg. The currency has appreciated 1.5 percent in August, poised for a third monthly gain.
The currency reached Morgan Stanley’s end-2010 target of 3.13 “ahead of schedule,” the strategists wrote. They cited the dollar-ringgit’s deviation from its 200-day moving average and deviations in returns from the average between 1999 and 2010, for their currency outlook.
Gains for 2011
Morgan Stanley maintained its forecast for the ringgit to trade at 3.13 per dollar by the end of the year, Chong wrote in an e-mail today. The currency may advance 1.8 percent to 3.09 by the end of June and to 3.05 by end-2011, he wrote.
Bank Negara Malaysia has raised its overnight interest rate three times to 2.75 percent and eased foreign-exchange controls on Aug. 18 by allowing the use of ringgit to settle cross-border trades.
“The central bank has pleasantly surprised the market with its pre-emptive tightening and partial relaxation of capital controls,” according to Morgan Stanley’s report. “Valuations are not an impediment for the ringgit to continue to strengthen further” in 2011, it said.
The U.S. bank said its estimates for gross domestic product to increase 6.5 percent in 2010 and 5 percent in 2011 have “upside risks.”
--Editors: Simon Harvey, Ven Ram
August 27, 2010, 3:39 AM EDT
By David Yong
Aug. 27 (Bloomberg) -- Malaysia’s ringgit is headed for a period of consolidation as technical indicators signal this year’s market-leading rally may be running out of steam, according to Morgan Stanley.
The currency has strengthened 9 percent in 2010 and reached a 13-year high of 3.1238 per dollar on Aug. 23, Asia’s best performance excluding the yen. Malaysia’s economy expanded 8.9 percent last quarter, following growth of 10.1 percent in the first three months, the best quarters in a decade.
“The ringgit momentum may be close to exhaustion after moving so quickly,” Hong Kong-based strategists Stewart Newnham and Yee Wai Chong from the U.S. bank, wrote in a research report today. “We therefore expect dollar-ringgit to enter a period of consolidation before heading lower in 2011.”
The ringgit declined 0.1 percent to 3.1427 per dollar as of 2:59 p.m. in Kuala Lumpur, from 3.1410 a week ago, according to data compiled by Bloomberg. The currency has appreciated 1.5 percent in August, poised for a third monthly gain.
The currency reached Morgan Stanley’s end-2010 target of 3.13 “ahead of schedule,” the strategists wrote. They cited the dollar-ringgit’s deviation from its 200-day moving average and deviations in returns from the average between 1999 and 2010, for their currency outlook.
Gains for 2011
Morgan Stanley maintained its forecast for the ringgit to trade at 3.13 per dollar by the end of the year, Chong wrote in an e-mail today. The currency may advance 1.8 percent to 3.09 by the end of June and to 3.05 by end-2011, he wrote.
Bank Negara Malaysia has raised its overnight interest rate three times to 2.75 percent and eased foreign-exchange controls on Aug. 18 by allowing the use of ringgit to settle cross-border trades.
“The central bank has pleasantly surprised the market with its pre-emptive tightening and partial relaxation of capital controls,” according to Morgan Stanley’s report. “Valuations are not an impediment for the ringgit to continue to strengthen further” in 2011, it said.
The U.S. bank said its estimates for gross domestic product to increase 6.5 percent in 2010 and 5 percent in 2011 have “upside risks.”
--Editors: Simon Harvey, Ven Ram