Ringgit Exchange Rate Revisited

In our previous article dated on 25 August 2017 (Read more here), Ringgit Malaysia (RM) was forecasted to be trading between 3.80 to 4.18 in 2018, using regression analysis against international oil price.  At that time, RM was trading at 4.28 to USD.  The following chart shows the forecasted range published way back in 25 August 2017.

The actual exchange rate movement is inline with the forecasted data, underpinned by higher oil price and subdued concerns from a series of negative news since August 2015.

In a February 2018 poll of 15 investment banks surveyed by The Wall Street Journal, the Brent oil is expected to trade at average of USD 62 per barrel for year 2018 (Read more here).  Using the oil vs exchange rate regression plot in previous article (Read more here), the exchange rate is expected to trade between the revised forecasted band of RM3.65 to RM4.05  for the next six months up to October of 2018, with increased volatility due to the following factors:

·        Outcome of Malaysia’s 14^th General Election;

·        Potential Trade War between US and China;

·        Political tensions between US and North Korea; and

·        Uncertainty of international oil price.