USD/MYR likely to ease again to 4.45 by end of Q1 2017 on strong economic growth, says Commerzbank

The USD/MYR currency pair is expected to ease again to 4.45 by the end of the first quarter of 2017, following strong economic growth in the Asian economy, with relative stabilization in the economy.

The MYR is the worst performing Asian currency since the US election outcome, slumping over 6 percent to the weakest level since the 1998 Asian Financial Crisis. USD-MYR is currently trading at around 4.48.

The weak investment sentiment is driven by its vulnerability to capital outflows given the high foreign ownership of government bonds, relatively weak reserves buffer, concerns over the reinstatement of capital controls and lingering political uncertainties.

Given the sharp decline, there are elements of overshooting. At current levels, MYR is seen to be in oversold territory particularly with relatively supportive macro metrics including a respectable GDP growth of 4–5 percent, current account surplus of around 2 percent of the country’s gross domestic product (GDP) and stabilization in the fiscal deficit, Commerzbank reported.